The Webjet Limited (ASX: WEB) share price pushed higher on Thursday after releasing an update on its transformation plans.
The online travel agent's shares overcame the market weakness to rise 1% to $6.24.
Can the Webjet share price keep climbing?
In response to its update, this morning Goldman Sachs released a note discussing its plans.
The good news for shareholders is that the broker liked what it saw and has reiterated its buy rating and $7.36 price target on Webjet's shares.
Based on the current Webjet share price, this price target implies potential upside of 18% over the next 12 months.
What did Goldman say about the update?
Goldman took away a number of positives from the update. This includes its cost reduction plans and the long term opportunity that its WebBeds business has.
It commented: "Webjet hosted an investor presentation focused on the Bed banks business, discussing the longer term opportunity and the roadmap towards achieving c. 20% cost efficiency at full scale. The presentations provided comfort, in our view, regarding the growth opportunity for Webbeds in terms of market share improvements and permanent cost efficiencies while also discussing the longer term vision in terms of technology adoptions and targets."
The broker notes that its cost efficiency is expected to be achieved through systems simplification, the implementation of a new ERP, and leveraging blockchain technology.
What about WebBeds' growth opportunity?
Goldman Sachs was pleasantly surprised by management's total transaction value (TTV) aspirations for the WebBeds business.
The company is targeting a much greater share of the market than the broker was expecting, which would lead to more than double the TTV its analysts were forecasting.
It explained: "Webjet also quantified the TTV aspirations for the Webbeds business at A$10bn, which would represent c. 14.2% market share of the current addressable market. Our longer term forecasts currently imply only TTV of A$3.9bn for the Webbeds business, offering significant upside to our outlook if the group starts delivering to its aspirational targets."
However, no changes are being made to the broker's forecasts just yet. It intends to sit tight and see how things develop.
"While the upside suggested by WEB implies significant upside to our long term forecasts, we make no changes to our earnings forecasts until we see clear evidence of a recovery taking shape. Our 12 month target price on WEB is at A$7.36 and we are Buy rated."
