It's a funny ol' place this sharemarket thing…
One week, everyone is concerned about Flight Centre Travel Group Ltd's (ASX: FLT) apparent 0.3% loss of market share. Then, next minute, the stock price is up 7.5%.
Go figure.
Why have Flight Centre shares soared?
Aside from an announcement today, which detailed Flight Centre's decision to issue unsecured debt to its store managers and senior employees, no price sensitive information has emerged from the company which could explain its recent share price rise.
However, it's worth remembering that in a single week of trading late last month, the company's share price fell a whopping 20%.
Savvy – long-term – investors appear to have seen an opportunity to buy a great company, at a very good price – I know I did.
Indeed, some analysts had recently grown concerned about the growth of convenient online discount operators, like the growing Booking.com and Webjet Limited (ASX: WEB).
As an aside, Webjet is currently valued at $304 million by the market. That compares to Flight Centre's value of $3.4 billion, with an available cash balance of about $500 million.
All things considered, these concerns (as well those of a falling Australian dollar) appear overblown, although I'll admit it is important to monitor any developments in the digital space.
In my opinion, however, a more likely catalyst for a fall in profits in the short term would be a sustained lull in consumer confidence. After all few people will go on a holiday if they are concerned about their job.
Should you buy Flight Centre?
The short-term direction of Flight Centre's share price is anyone's guess, but over the long term it has significant appeal. Firstly, it has a growing overseas presence, with almost half of all stores located offshore. This provides diversification and growth potential. It also has a strong cash balance to enable it to drive efficiency gains and opportunities in the local market.
Then there's its 4.3% fully franked dividend…
Want a better dividend stock than Flight Centre?
