Broker tips 23% upside for Webjet share price and the return of dividends

The Webjet Limited (ASX: WEB) share price was a strong performer on Wednesday.

The online travel agent's shares rose a sizeable 8% to $5.52.

Investors were bidding Webjet's shares higher after responding positively to the release of the company's trading update.

Where next for the Webjet share price?

The good news is that Goldman Sachs believes the Webjet share price can keep ascending from here.

According to a note out of the investment bank from this morning, the broker has retained its buy rating with a slightly trimmed price target of $6.80.

Based on the latest Webjet share price, this implies potential upside of 23% for investors over the next 12 months.

And with Goldman expecting dividend payments to return in FY 2023 with a modest 6 cents per share dividend, the total potential return stretches to over 24% including it.

What did the broker say?

Goldman notes that Webjet's trading update revealed a strong recovery in the Bedbanks business and impressive cash flow forecasts.

And while it notes that a slower than expected recovery in international travel is holding back its OTA business, it has seen enough to remain bullish. Particularly given the aforementioned free cash flow generation, which it believes supports potential M&A activities and a final dividend payment in FY 2023. The broker concluded:

Overall, we view travel recovery as trending in the right direction, albeit with hiccups in the trend and we believe WEB remains well positioned to capitalise on the recovery through their online OTA offer and more importantly the strengthening position in the Bedbanks market. We expect the group to resume dividend payment from final dividend in FY23. Our revised 12m Target Price of A$6.80 offers a total potential return of 24.3% and we maintain our Buy rating on WEB.