With restrictions lifting and international travel on the horizon, Australians eager for a holiday will soon be flocking to the nearest travel agent in hopes of planning the next family vacation. Today we will look at two of the ASX’s most traded travel agents Webjet Limited (ASX: WEB) and Flight Centre Travel Group (ASX: FLT). WEB and FLT have been down 77% and 64% in the last year, respectively. Despite COVID-19, FLT and WEB could be a strong investment as travel restrictions ease and demand soars.
Flight Centre’s CEO Graham Turner has slammed the PM’s mass gatherings ban after the coronavirus pandemic forced the closure of 100 of his stores.https://t.co/3lPdHe1hUO
— news.com.au (@newscomauHQ) March 13, 2020
Webjet Limited (ASX: WEB)
Webjet is a travel agency that operates across Australia and New Zealand targeting both B2C and B2B sectors through several sub-brands. COVID-19 saw the bulls go into hiding. Ultimately, triggering Webjet to fall from its six month high of $10.43 to $2.26.
However, investors sentiment is changing as Webjet’s share price jumped by 35% in May alone. Australia’s low coronavirus infection rate following successful lockdown and social distancing measures partially aided the bullish rally. However, the positive travel forecasts are the main reason why the bulls rallied behind WEB.
Also, Webjet raised $231 million in equity back in April to bolster their sails through the COVID-19 storm. Overall, if positive travel forecasts continue and COVID-19 dissipates (highly unlikely), then we should see the bulls own the chart.
Flight Centre Travel Group (ASX: FLT)
Our other contender Flight centre is one of the largest travel agency companies in the world. FLT operates company-owned stores in 23 countries as well as a corporate travel management network that spans 90 countries. FLT witnessed share price growth of 17.7% in the last 7seven days alone. Like Webjet, FLT’s miniature recovery is due to easing restrictions, and the positive market sentiment. The share price of Flight Centre has fallen drastically from a 6 month high of $40.62 to a 6 month low of $8.92.
Comparison of key financials
Are WEB and FLT worth the investment?
Before I start, I am obliged to remind our viewers that this not advice, only general commentary from my extensive research into this area.
Short Answer: Maybe but not right now (opinion not advice)
While economies are slowly opening up, international travel is still months away. Especially with Bali expecting to host international tourists by October, still four months away. That means these two companies won’t be booking holidays. Thus WEB and FLT will not be creating sustainable cash flow for the next few months.
Furthermore, with a recession on the horizon and increased unemployment, disposable income is set to fall dramatically. Consequently, fewer people will be travelling abroad. Another reason I believe WEB and FLT may suffer in short to medium term is an increase in domestic tourism. After last summers bushfires and COVID-19, I feel many Australians would instead explore their own backyard rather than venture across the pond.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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Written by Marlon Ferguson, Associate of YIG.