Online travel stock Webjet (ASX:WEB) despite their revenue being massively affected by the pandemic have outpaced the ASX200 benchmark in the past twelve months. So we take a look at our own Webjet Share Price Forecast for 2021 and beyond.
The Webjet Share Price
Shares of online travel company Webjet have outperformed the ASX200 this year rising +47.14% to trade at $5.15 per share and a market capitalisation of $2 billion. This is in comparison to the ASX200 performance of 25.55%.
Webjet Share Price Facts
|Webjet Share Price||$5.15 per share|
|Webjet Market Cap||$2billion|
The story, however, is a little bleaker when you zoom out. Webjet (WEB ASX) has been one of the companies that have been significantly affected by the COVID pandemic, with shares trading as high as ~$13.60 per share. This means shares are still down about 50% just prior to COVID.
Revenue has taken a steep dive over the past 2 years from FY2018 of $751million to now in 2021 having a trailing twelve months of only $70.8million. The group seem to have done a decent job managing their cost base and reserving the business.
Webjet Shares Fundamentals
Everyone likely knows about Webjet’s traditional consumer and business-facing platform webjet.com.au, however, little known is potentially the company B2B facing platform WebBeds (launched in 2013, b2b division) which was up until recently gaining significant traction.
|Total Revenue||Operating Income|
Operating income and revenue has fallen significantly since FY2018 from a peak revenue of $751million dollars. However, Webjet seems to have faired a little better when compared to their rival Flight Centre and HelloWorld Travel due to not having any bricks and mortar stores.
The success of the business will likely depend on how quickly international travel resumes and to what capacity. It’s worth remembering that even while Australia may still be in harsh lockdown environments the rest of the world is starting to open up, as Webjet operates in numerous countries.
We should start to see bookings resuming and revenue being generated outside of Australia. This includes the WebBeds business, which in our opinion should outpace the recovery of the Webjet business over the next few months.
Webjet Share Price Forecast
Whilst the share price of Webjet is still down about 40% since the pre-pandemic highs the market capitalisation of the company is already rebounding and reaching new all-time high’s.
Investors seem to be extremely eager to jump back into the seats and price in “future’ growth now. Even as the company has still very much not yet recovered or even seeing revenues anywhere near the numbers from back in 2019.
In my opinion, this probably comes from two angles, investors who saw that the company was potentially in a decent spot and got in at a low price or investors simply seeing the share price is still low, but not looking at the underlying market cap and fundamentals.
Whilst over the long term, the business is unlikely to fail due to strong capital measures secured by the company back in March of 2020. The valuation of the business seems to be priced as full blue sky ahead.
This may be a case similar to what Twitter shareholders witnessed back in 2014. Investors who bought at the top have had to wait many years to start realising gains in the share price again.
This goes to show that investors that are willing to pay massive multiples for potentially higher growth in the future may be left short when the company doesn’t deliver on the growth or hype.
Webjet ASX FY21 Earnings Report
Webjet (WEB ASX) in their FY21 Earnings Report released to the market on 19th May 2021, highlighted a number of improving measures, however also highlighted some still concerning measures with the business.
The company flagged the following positive performance indicators:
- Webjet OTA business returns to profitability as the domestic travel markets reopen, continuing to improve market share.
- WebBeds seeing improved booking performance, however many regions continue to be impacted by lockdowns and restricitve measures.
- Pro-Forma $431million in cash
- FY21 Cash burn per month on average $5.5million per month
A slide from the FY21 report is very helpful in discerning the recovery and impact of the pandemic. You can see that the domestic OTA business is recovering at a significantly faster rate than the International Webbeds business.
It would have been good to see the Webbeds (b2c division) business recovering a little faster, however, as the rest of the world opens up as seems to be the trend for the remainder of 2021, we should start to see the recovery pick up the pace.
Webjet Financial Summary
The financial results paint a bit of a picture, however, a takeaway point that really speaks out to us, is the expenses have decreased significantly between FY20 and FY21. Potentially as the business opens up again an upside for the share price here may be that WEB ASX will be able to keep their expenses lower than prior to COVID.
The group has already flagged that potentially after the pandemic the business will be more profitable, with the group now targeting an 8/5/3 model as opposed to a pre-pandemic of an 8/4/4 model. That is 8% revenue, 5% profit and 3% expenditure.
If the group manage to keep expenses low, this should result in a more profitable business emerging from the pandemic.
Webjet Shares Dividend History
Webjet up until the pandemic had typically been increasing their dividend YoY from 2009. WEB ASX typically paid a fully franked dividend. However, due to the companies falling revenues during COVID the company has not paid a dividend since March 2020 and has not provided guidance on when they believe this will resume.
Shares up until being cancelled were being paid twice yearly, in March and September, this is in line with most other dividend-paying companies on the ASX.
Does Webjet have a DRIP? Unfortunately, Webjet does not have a Dividend Reinvestment Plan (DRIP, DRP) in place for their shareholders.
Insider Ownership and Trading
We can see that institutions hold the majority of shares in WEB.ASX with 62.7%. The General public and private companies hold 28.6% and 5.8% respectively. Individual insiders hold 2.9% of the company.
CEO John Gusic owns only 1.28% of the company with 4,853,767 shares or approximately A$25million worth. This seems a little small compared with other companies of a similar market capitalisation.
It has been a little quiet on the individual insider transaction over the past little while, with the only notable transaction being Denise McComish (member of the board of directors and independent Non-Executive director) buying approximately $25,000 of shares on market for an average price of $5.01 per share.
A very notable trade that has occurred over the past 24 months however is CEO John Gusic selling approximately $21million dollars of shares back in September of 2020 at $3.98 per share. This is quite significant as it represented over 50% of the shares that he owned at the time. Roger Sharp the Chairman of the board also sold off a significant parcel of shares around the same time.
Other insider transactions mainly involve institutional buying from Vanguard, Colonial First State and New York Life investments. In our opinion, we don’t consider these very meaningful and are potentially technical in nature.
Should I Buy Webjet Shares – Prophets Take
Digital travel business Webjet whilst significantly affected by the pandemic seems to be in a position to be able to come out the other side a very strong and well-capitalised business thanks to the companies capital measures and cost reductions, during the pandemic.
There is still a significant way to go prior to the company being back at full operation, especially in their wholesale markets division Webbeds and car hire business Online Republic. However, as the world reopens and lockdown/restrictive measures are lifted the group should start seeing increased bookings back through the platforms. Especially as people may have been able to save a lot more money during the pandemic which will allow them to spend more on travel when the world comes back online.
The current market capitalisation of Webjet is above the pre-covid market cap, however without the same levels of underlying fundamentals. We are slightly worried that investors buying at these levels now, may still have some time to wait until the fundamentals catch up to the market cap.
Whilst we will be happy holding Webjet shares in our ASX200 ETF, VAS, it’s great to see the business seems to be in decent shape and ready to take advantage of a re-opening world.