There are many reasons why the Webjet Limited (ASX: WEB) share price will be in the spotlight in FY21 as it emerges from the COVID-19 baptism of fire!

The online travel agent will likely keep investors on the edge of their seats as its one of the most divisive stocks on the S&P/ASX 200 Index (Index:^AXJO) and could be a star player in mergers and acquisitions (M&As).

Of course, Webjet isn’t the only one in the travel sector to be hit hard by the coronavirus outbreak.

The Flight Centre Travel Group Ltd (ASX: FLT) share price and Qantas Airways Limited (ASX: QAN) share price have copped a beating, but it’s Webjet that’s splitting the experts.

It seems Flight Centre and Qantas are easier calls. Brokers are overwhelmingly recommending investors sell Flight Centre and buy Qantas, according to data on Yahoo Finance.

Consensus divided over Webjet

But in the case of Webjet, they are equally split between “buy” and “hold or sell” after the group received a €100 million ($162 million) cash injection through the issue of convertible notes.

The key point of contention is the uncertainty over when state and international borders will reopen, even though Webjet bought itself time through the convertible notes and the emergency $346 million capital raising in April.

A bull’s view

UBS is a bull when it comes to Webjet. The broker upgraded its price target to $5.35 from $3.75 a share and reiterated its “buy” recommendation on the stock on Friday.

“A high degree of uncertainty still remains around the travel market recovery, which will likely create a more volatile share price in the short-term,” said the broker.

“However, we continue to believe the high quality, well-capitalised players like WEB will take share and potentially acquire good businesses at discounted prices.”

Better placed than its peers?

UBS is feeling confident about Webjet’s future as the group aims mainly at leisure travellers who can easily substitute locations for holidaying. State border restrictions are lifting bar Victoria, but even then, all states are likely to allow border crossings in the not too distant future.

Further, there’s talk that Australia and New Zealand may form a travel bubble by September and this will open another market for Webjet. If travellers can’t go to Bali, they can head to Cairns or somewhere in New Zealand.

A bear’s view

However, some brokers like Morgan Stanley aren’t so sure. The extra cash from the con notes may give Webjet ammunition to make an opportunistic acquisition or two (so says management), but Morgan Stanley is taking a dim view of the move.

“Talk of meaningful M&A [merger and acquisition] following a c. 150% dilution event when cash burn is still close to peak levels seems optimistic,” said the broker.

“We feel that risks around receivables, working capital unwind and prolonged disruption are the main issues, and that balance sheet protection is the priority.”

Morgan Stanley prefers the Corporate Travel Management Ltd (ASX: CTD) share price over Webjet.

Webjet a takeover target?

As an aside, it’s also worth noting the hunter could be the hunted. Takeover speculation for Webjet was running rife in late 2019.

One has to wonder if potential bidders could come out of the woodwork amid the chaos, especially now that Webjet is cashed up.

Stranger things have happened!

More reading

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• 10 more top broker ASX share picks for FY21
• 2 dirt-cheap ASX shares to buy next week
• ASX 200 closes 0.4% higher, Cochlear share price up 6%

Motley Fool contributor Brendon Lau owns shares of Webjet Ltd. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post The Webjet share price is dividing analysts even as it becomes a likely takeover target appeared first on Motley Fool Australia.

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A number of risks currently face investors that could cause another market crash over the coming months. For example, there could be a second wave of coronavirus across many of the world’s major economies. There may also be rising trade tensions between the United States and China that cause investor sentiment to weaken.

Therefore, now could be the right time to focus your capital on high-quality shares that have a higher chance of surviving an economic downturn. Through taking a long-term view, and keeping some cash on hand, you could benefit from another stock market crash.

Holding cash in a market crash

Having some cash available during a market crash can be highly beneficial to long-term investors. It provides peace of mind so that you can pay for unexpected costs at a time when job security may be low. It also means that you are in a position to capitalise on lower valuations across the stock market.

Clearly, holding large amounts of cash for the long term is unlikely to produce high returns. But, at a time when the prospects for the world economy are uncertain, ensuring you have liquidity within your portfolio could be a major advantage should stock prices become more attractive over the coming months.

High-quality stocks

High-quality businesses may be in a better position than their industry peers to survive another market crash. For example, companies with solid balance sheets that contain little amounts of debt may be under less pressure to deliver sales and profit growth on a relative basis. Likewise, companies with wide economic moats may be less affected by a period of weaker growth for the world economy.

Furthermore, high-quality businesses may be able to take advantage of weak operating conditions to strengthen their competitive positions. For example, they may be able to take market share from their peers to improve their profit growth potential over the coming years. This could aid their share price performances, and boost your portfolio returns.

A long-term view

A market crash can cause investors to panic about paper losses within their portfolio. However, a loss is not realised until a stock is sold. As such, holding your stocks for the long term could be a means of allowing them to recover from short-term declines in their valuations.

Similarly, when buying stocks it could be a sound move to have modest expectations about their prospects over the short run. The challenging outlook for the economy means that many stocks may struggle to post improving levels of profitability. However, with the world economy and the stock market having strong track records of recovery over the long run, adopting a buy-and-hold strategy could allow you to benefit from improving performances over the coming years.

More reading

• 3 reasons why I’d buy dirt-cheap dividend stocks right now
• The Webjet share price is dividing analysts even as it becomes a likely takeover target
• How I’d invest in this stock market crash to make a passive income
• 3 of the best ASX growth shares to buy for the 2020s
• 3 very reliable dividend shares I plan to pay for my retirement

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Another stock market crash may be ahead. I’d take these 3 steps to get rich from it appeared first on Motley Fool Australia.

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Making a passive income has become increasingly difficult since the start of 2020. Continued low interest rates and challenging trading conditions mean there are fewer opportunities to earn a sound income return than there were even just a handful of months ago.

However, by focusing your capital on companies with defensive characteristics and affordable dividends, you could generate a worthwhile income return over the long run. It could improve your financial prospects and enable you to enjoy a greater degree of financial freedom.

Passive income prospects

With interest rates likely to remain at low levels over the medium term as policymakers seek to support the economy, making a passive income from assets such as cash and bonds may become more difficult. They may be unable to provide a sufficient return on your capital, and may even reduce your spending power if their returns lag inflation.

Therefore, buying dividend stocks could be the most worthwhile means of obtaining an income return over the coming years. Even though stock prices could be volatile over the coming months, weak investor sentiment may mean that the yields on offer across many stock market sectors are highly attractive relative to other income-producing assets. By purchasing a diverse range of high-yielding stocks, you could generate a much higher income return than that available through other mainstream assets.

Defensive characteristics

While some companies have decided to reduce or postpone their dividend payments over recent months, others continue to offer an appealing passive income. They often include businesses with defensive characteristics, whereby their business models are less correlated with the wider economy’s performance than many of their index peers.

For example, companies operating in the utility and consumer goods sectors may be less impacted by coronavirus than businesses in the retail and travel & leisure industries. As such, buying companies with business models that are less likely to be impacted by a slowdown in global GDP growth could be a means of obtaining a solid income return after the recent market crash.

Affordable dividends

Buying stocks that have affordable dividends could be another means of obtaining a solid passive income at the present time.

Many businesses are likely to experience slowing demand for their goods or services as factors such as rising unemployment and weak consumer confidence take hold in many of the world’s major economies. If they have dividends that were previously very affordable, in terms of being easily covered by net profit over the past few years, they may be less likely to cut shareholder payouts in response to a period of weaker profitability.

Therefore, by assessing the affordability of a company’s dividend, you could build a more robust income stream in what may prove to be a challenging period for income-seeking investors.

More reading

• 3 of the best ASX growth shares to buy for the 2020s
• 3 very reliable dividend shares I plan to pay for my retirement
• 3 top ASX dividend shares I would buy next week
• Here are 3 ASX COVID-19 success stories
• These were the best performing ASX 200 shares last week

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post How I’d invest in this stock market crash to make a passive income appeared first on Motley Fool Australia.

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