Webjet share price takes off following broker upgrade

Webjet shares have been upgraded…

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Paper aeroplane rising on a graph, symbolising a rising Corporate Travel Management share price.

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Key points

  • Webjet shares are ascending on Wednesday
  • This follows news that Citi has upgraded its shares
  • The broker expects Webjet to be in a stronger position post-COVID

The Webjet Limited (ASX: WEB) share price has been a positive performer on Wednesday.

In afternoon trade, the online travel agent's shares are up 2.5% to $5.44.

Why is the Webjet share price taking off?

The catalyst for the rise in the Webjet share price today appears to have been a broker note out of Citi.

According to the note, the broker has upgraded the travel company's shares to a buy rating with an improved price target on $6.50.

Based on the current Webjet share price, this implies potential upside of almost 20% for investors over the next 12 months.

What did the broker say?

Citi believes it is time for investors to check-in with Webjet, highlighting that the company could be a big winner from the COVID reopening.

And while the broker still expects Webjet to post a loss in FY 2022, it is forecasting a return to profit in FY 2023. Citi has forecast a loss per share of 13 cents in FY 2022, and then earnings per share of 18 cents in FY 2023 and 30 cents in FY 2024.

Based on the current Webjet share price, this would mean it currently trades at 30x FY 2023 earnings and a much more respectable 18x FY 2024 earnings.

Citi commented: "With a user pay business model largely exposed to volumes and low fixed costs, we expect Webjet should be a relative leader in re-opening stock earnings. Additionally we think B2B should return in a stronger position with an American growth leg, lower costs and a better industry position. While B2C has the opportunity to pick up share as Flight Centre shifts business online, and the number of domestic carriers increase. Subsequently we upgrade our rating to a Buy and a $6.50 target price."

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia 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.

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