3 reasons why the Webjet (ASX:WEB) share price could be an opportunity

The Webjet Limited (ASX:WEB) share price could be an opportunity for investors because of a few different reasons, like pent-up demand.

| More on:
A woman stands on a runway with her arms outstretched in excitement as a plane takes off behind her representing the rising Qantas share price today

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

There are a few different reasons why the Webjet Limited (ASX: WEB) share price could be an interesting idea at the current value.

The ASX travel share has been through a lot of disruption over the last 15 months because of COVID-19 impacts.

What's happening right now with the Webjet share price?

In the last few weeks the Webjet share price has been falling as it seems increasingly likely that Australia's international borders are going stay closed longer than expected.

Since 18 March 2021, the Webjet share price has declined by 17%. However, there has been a recovery since the announcement of the efficacy of the COVID-19 vaccines that are now being distributed around the world.

Investors recently got an insight into the business' performance and where it sees things going for the coming months. The FY21 report release showed why investors could be positive on the Webjet share price:

Cost efficiencies

Webjet is going through its transformation strategy with WebBeds, its business to business segment. Whilst bookings improved in the second half of its financial year, there are still large-scale restrictions in place in most regions.

But Webjet managed to reduce costs by 42% over the nine month period, reflecting a reduction of headcount and overheads.

The transformation strategy initiatives are on track to deliver at least 20% greater cost efficiencies at scale, which will further cement WebBeds as the clear lowest cost global player, according to management.

Previously before COVID-19, WebBeds was aiming for an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 50%. This would occur with revenue being 8% of total transaction value (TTV) and expenses being 4% of TTV.

However, it now has a new target of expenses being just 3% of TTV, which would lead to an EBITDA margin of 62.5%.

Profitable online travel agency (OTA)

Webjet's OTA reported that in FY21, being the nine months to 31 March 2021, it saw positive EBITDA of $4.1 million thanks to significant bookings growth in the second half of FY21.

Profitability is increasing as time goes on. The first half (being six months) EBITDA was $1.1 million and the second half (three months) saw EBITDA of $3 million.

The EBITDA margin in the first half was 9.7% whilst the second half EBITDA margin was 30.9%.

Improving outlook

Webjet believes that there is strong pent-up demand for travel, particularly with leisure travel.

The ASX travel share has retained its global footprint and diverse customer base. This will allow it to capture demand when international borders open.

With the OTA business, it said that in April 2021, Australian domestic flight bookings were 95% of April 2019 levels.

The management remain hopeful that vaccines will allow travel markets to reopen. With WebBeds, the US market is opening up fastest, TTV is already at 83% of April 2019 volumes.

All businesses, including Online Republic, are seeing increased bookings and profitability month over month during the 2021 calendar year.

Should you invest $1,000 in Woolworths Group Limited right now?

Before you buy Woolworths Group Limited 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 Woolworths Group Limited 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 Tristan Harrison 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 Travel Shares

A corporate-looking woman looks at her mobile phone as she pulls along her suitcase in another hand while walking through an airport terminal with high glass panelled walls.
Travel Shares

After lowering its guidance, what's Macquarie's price target on Corporate Travel Management shares?

What does this broker have to say about the travel company?

Read more »

Man sitting in a plane seat works on his laptop.
Travel Shares

Why did the Qantas share price lose altitude in April?

Qantas shares didn’t join in April’s ASX 200 rebound. But why?

Read more »

Man waiting for his flight and looking at his phone.
Travel Shares

Corporate Travel shares crash 11% as Trump tariffs bite

Trump’s tariffs are roiling Corporate Travel shares on Friday.

Read more »

A family walks along the tarmac towards a plane representing more people travelling as ASX travel shares recover
Travel Shares

How lower interest rates could send this beaten down ASX All Ords stock flying

A leading expert says this sold-off ASX All Ords stock is ‘well placed for growth’.

Read more »

Woman on a tablet waiting in for her flight in an airport and looking through a window.
Travel Shares

After a guidance downgrade, what does Macquarie think Flight Centre shares are worth?

Is this stock great value after its downgrade?

Read more »

Woman on a tablet waiting in for her flight in an airport and looking through a window.
Travel Shares

Will lower US travel impact Flight Centre shares?

New data reveals an uncertain future for US travel. Here’s how it could impact travel shares. 

Read more »

Couple at an airport waiting for their flight.
Travel Shares

Why is the Flight Centre share price sinking today?

ASX investors are bidding down Flight Centre shares on Monday. But why?

Read more »

A happy family of four on holidays stand on a jetty and cheer.
Travel Shares

Travel to the US is down this year. Will Australia's tourism sector benefit?

2025 could prove to be a good year for Australian hotel operators.

Read more »