Webjet (WEB) suffers at the hands of Thomas Cook downgrade
Stock
Webjet (WEB) $15.57 as at 25/09/2018
Event
Travel stocks have taken a hit today following a downgrade from the UK listed Thomas Cook overnight. Listed in London under TCG, shares fell over 28% after the tour company and airline dropped profit guidance by a whopping 13% to £280m, blaming a hot summer for a fall in demand for holidays across Europe. On the back of that announcement, Sydney Airport is down -1.22%, Flight Centre is off -2.34% while Webjet (WEB) has been hardest hit, trading down -6.15%. WEB has run the majority of Thomas Cook’s wholesale hotels business since 2016.
As recent as the companies FY18 result a month ago, Webjet was looking to ramp up volume through the Thomas Cook hotels site. any sign that travel growth is slowing on an international scale will obviously hurt these three names, but most importantly Webjet has the largest risk to earnings based on the Thomas Cook downgrade.
Webjet (WEB) Chart
Market Matters Take/Outlook
Webjet trades on a reasonable ~24x forward PE which is around a 30% premium to its historical average - we simply think the multiple is too high given the risks around growth in the business. Technically it looks on track to trade back to $14.
