What’s your opinion on Webjet Ltd (WEB)?

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Question asked 01/07/2023

What’s your opinion on Webjet Ltd (WEB)?

Dear James and Shawn and the team, Thanks a lot for taking this question, and thanks for giving me very good and detailed analysis to my questions. WEB’s share price has fallen from a high of $7.7 end of May after releasing a strong FY23 Fin results to $6.75 this morning (27/June) –EOFY profit taking? WEB has exited the pandemic with a lower cost base, consolidated systems and a large business in the US. With the economy slowing around the world, WEB may face consumer headwinds for the B2C segment. The B2B segment, however, is still expected to grow double-digit. What is your opinion on WEB short to medium term. Thanks again for taking this question.

Answer

Hi Peter,

You’re right, their FY23 result in May was very solid and ticked pretty much every box, 6% ahead of consensus on the revenue side with earnings up more, and of particular note was the acceleration in the 2H. Your reference to the B2B segment is key, the share price decline we think would be associated with concerns that businesses with spend less, cut costs where they can as economic conditions toughen. The same view has prompted a re-rate lower in Corporate Travel (CTD).

We like the WEB business, just the macroeconomic headwinds are building, and we question whether or not the valuation is actually cheap enough for what comes next.

Technically, we would be interested in WEB in the low/mid $6 region, leaving room to add into a move closer to $5.5, where the risk/reward would look appealing i.e. accumulate into weakness as the Australian economy wrestles with rising interest rates.

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Webjet Ltd (WEB)

LAST UPDATED 29/06/2023 17:10

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