Webjet shares crash 11% lower on coronavirus concerns and broker downgrade

The Webjet Limited (ASX:WEB) share price has crashed lower on Tuesday. Here's why the travel company's shares are under pressure…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The worst performer on the S&P/ASX 200 index on Tuesday has been the Webjet Limited (ASX: WEB) share price.

The online travel booking company's shares are down 10% to $12.90 at the time of writing. They were down as much as 11% in earlier trade.

Why is the Webjet share price crashing lower?

There have been a couple of catalysts for the sharp share price decline on Tuesday.

The first is the coronavirus outbreak. Investors have been selling travel shares amid concerns that the outbreak could put pressure on travel bookings in the near term.

Especially in China, which is a very important part of the global travel market. In Australia, for example, China is the leading source of short term visitor arrivals. In November 120,200 Chinese nationals visited Australia. This is almost double the number of people visiting from the United States.

But with a number of cities in China placing restrictions on travel in an effort to contain the virus and the U.S. recommending travellers avoid the country altogether, global tourism could take a hit in 2020.

This would be bad news for travel bookers such as Webjet and rivals Corporate Travel Management Ltd (ASX: CTD) and Flight Centre Travel Group Ltd (ASX: FLT).

Broker downgrade.

Another catalyst for Webjet's sizeable decline appears to be a broker note out of Morgan Stanley this morning.

According to the note, the broker has downgraded Webjet's shares to an underweight rating and slashed the price target on them by almost 20% to $10.00.

Morgan Stanley made the move due to concerns that tech giant Google could be negatively impacting its B2C business.

It notes that travel giants Expedia and TripAdvisor have both blamed Google for reductions in their earnings and outlooks. As a result, it appears concerned Webjet may have to increase its marketing costs and give away margin in order to compete.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Flight Centre Travel Group Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Fallers

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why CBA, Inghams, Praemium, and Strike Energy shares are tumbling today

These shares are having a tough time on Tuesday. But why?

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Share Fallers

Why Brightstar, Eagers Automotive, Regis Resources, and Westpac shares are sinking

These shares are starting the week in the red. But why?

Read more »

Disappointed man with his head on his hand looking at a falling share price his a laptop.
Share Fallers

Why 29Metals, Atlas Arteria, DroneShield, and Yancoal shares are falling today

Let's see why these shares are ending the week in the red.

Read more »

Shot of a young businesswoman looking stressed out while working in an office.
Share Fallers

Why 29Metals, CAR Group, DroneShield, and Santana Minerals shares are falling today

These shares are missing out on the good times on Thursday. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Imricor, Imugene, Newmont, and Pepper Money shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Cromwell Property, Metcash, Pilbara Minerals, and Tyro shares are falling today

Let's see why these shares are under pressure on Tuesday.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Block, Computershare, South32, and Strickland Metals shares are falling today

These shares are starting the week in the red. But why?

Read more »

Person with thumbs down and a red sad face poster covering the face.
Share Fallers

Why Imricor, Ora Banda, Ventia, and Vulcan shares are dropping today

These shares are ending the week in the red. But why?

Read more »