Webjet (ASX:WEB) share price rises on bullish broker note

The Webjet Limited (ASX:WEB) share price is pushing higher on Wednesday after being the subject of a bullish broker note this morning…

| More on:
A large plane rolls down a runway with a sunny blue sky behind it as brokers reveal their outlook for the Flight Centre share price in FY23

Image source: Getty Images

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 Webjet Limited (ASX: WEB) share price is on course to record a decent gain on Wednesday.

In morning trade, the online travel agent's shares are up 2% to $6.32.

Why is the Webjet share price pushing higher?

The catalyst for the strong gain by the Webjet share price today appears to be a broker note out of Goldman Sachs this morning.

According to the note, the broker has initiated coverage on the company's shares with a buy rating and $7.36 price target.

Based on the Webjet share price at yesterday's close, this price target implies potential upside of 21% over the next 12 months.

Why is Goldman Sachs positive on Webjet?

Goldman believes that Webjet is well-placed to benefit from the travel market recovery. It explained:

"Webjet, the #2 bed bank globally and Australia's leading domestic Online Travel Agent, looks well-placed to benefit from the travel recovery. Webjet's OTA profitability was already one of the strongest among competitors prior to COVID-19 and we expect this to improve as activity levels return to normal. We believe bed bank players will take on increased importance as independent hotels compete amid the reduced demand."

"We forecast Webjet to post an EBITDA CAGR of +9.5% over FY19-24E. We believe its OTA business offers a balanced exposure to the domestic-led recovery and expect it will maintain a strong balance sheet. We initiate with a Buy and a 12-month TP of A$7.36, with potential upside of 21.1%."

Acquisition opportunities

The broker also suspects that Webjet could be in a position to bolster its future growth with acquisitions once trading conditions return to normal. It said:

"Webjet has said it has maintained its interest in looking for attractive acquisition opportunities that might arise, especially adjacent to the Bedbanks business. Taking the DOTW and JacTravel acquisitions as a point of reference, these businesses were priced at an average of 0.4x EV/TTV. We calculate headroom availability to the group for acquisitions as equal to the sum of cash balance and undrawn facilities, net of the minimum reserve requirement (A$125mn) — this was a total of c. A$258mn as at the end of December 2020."

"Based on the historical acquisition multiples, we estimate the group has enough capacity to acquire a business with TTV of up to A$650mn in the pre-pandemic scenario, representing c. 30% of FY19 TTV. That said, we think valuations could be more attractive in the current environment, implying potential for a sizeable acquisition if the right opportunity was to come by."

Valuation

Goldman acknowledges that the Webjet share price looks overvalued based on its short-term earnings. However, it feels it is attractive on a normalised basis. It explained:

"The absolute enterprise valuation is up 9.1% vs pre-pandemic times (using 21 Feb 2020, the pre-pandemic peak, as the reference period). On a relative valuation basis, WEB trades at a 143% premium to industrials ex financials, vs a pre-pandemic average of a 2% discount. However on a normalized forward earnings basis (FY24), WEB currently trades at 17.6x P/E."

Should you invest $1,000 in Altium right now?

Before you buy Altium shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Altium wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers

Person pretends to types on laptop drawn in sand.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a happy finish to the week for ASX shares this Friday.

Read more »

Five young people sit in a row having fun and interacting with their mobile phones.
Share Gainers

5 ASX All Ords stocks rocketing higher this week

Investors sent these five ASX All Ords stocks soaring this week. But why?

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why Boss Energy, Capstone, Dimerix, and Platinum shares are storming higher today

These shares are having a good finish to the week. Let's find out why.

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

It was the ASX's fourth day of gains for the week today.

Read more »

a man raises his fists to the air in joyous celebration while learning some exciting good news via his computer screen in an office setting.
Share Gainers

Why Cedar Woods, Healius, NextDC, and Platinum shares are charging higher today

These shares are rising on Thursday. But why are investors buying them? Let's find out.

Read more »

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price
Share Gainers

These were the best-performing ASX 200 shares in April

These shares were in fine form in April. Let's see why they outperformed.

Read more »

Hiker man backpacker with hands up in the summer mountains with cloudy sky.
Share Gainers

Here are the top 10 ASX 200 shares today

The ASX made it three from three.

Read more »

Ecstatic woman looking at her phone outside with her fist pumped.
Share Gainers

Why Cedar Woods, Orthocell, PEXA, and St Barbara shares are storming higher today

These shares are having a good session on hump day. But why?

Read more »