Is now a good time to consider buying Webjet Limited (ASX: WEB) shares despite all of the COVID-19 impacts? The Webjet share price has been volatile over the last 16 or so months.
It's down around 6% from Thursday. Webjet has fallen 21% since 18 March 2021. The ASX travel share is still down around 50% from its pre-COVID-crash price.
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A recovery halted in its tracks?
Less than two MONTHS ago, the business released its FY21 result.
In that REPORT, the company said that the financials reflected the continued impact of COVID-19 on the global travel industry.
But the company pointed to some shorter-term and longer-term positives.
It said that cost reductions were underway in all businesses and are expected to deliver 20% lower costs across the group once the business returns to scale.
Webjet also said that its online travel agency (OTA) profitability continues to improve which underscored the scalability of the business model, according to management. Its market share continued to increase and the FY21 second half earnings before interest, tax, depreciation and amortisation (EBITDA) margin was back above 30%.
As markets reopened, businesses were rebounding quickly. As at April 2021, Webjet OTA Australian domestic bookings were 95% of the level of April 2019 levels. WebBeds USA total transaction volume (TTV) was at 83% of April 2019 levels. Online Republic bookings were 48% of April 2019 levels.
Management also said that WebBeds is committed to emerging as the number one global business to business provider, taking advantage of new revenue opportunities. Transformation initiatives are on track to reduce costs by at least 20% when back at scale. It's now targeting revenue to be 8% of TTV, costs to be 3% of TTV and EBITDA to be 5% of TTV. That translates to an EBITDA margin on revenue of 62.8%.
But Sydney and NSW are now being impacted by restrictions and lockdowns. Sydneysiders are limited to exercise within 10km or within their local government area (LGA). There have also been restrictions imposed in recent weeks in Melbourne, Perth and Brisbane.
Time to look at the Webjet share price?
One of the latest brokers to have their say on Webjet is Morgan Stanley. It has a price target of $4.30 on the business, which suggests a potential decline of more than 10% over the next 12 months if the broker is proven right. But the rating is currently a hold.
Morgan Stanley said that Webjet is being hurt by these COVID restrictions and it delays the domestic recovery. The summer in the northern hemisphere is also being impacted.
