Some may have launched into 2022 thinking it might be the year the travel sector rebounds. With COVID-19 restrictions gradually easing in late 2021 and pent-up Aussies desperate for a holiday, many investors might have cast their eyes on the Flight Centre Travel Group Ltd (ASX: FLT) share price.
Alas, such hopes for 2022 did not come to fruition. The Flight Centre share price has fallen more than 20% so far this year to trade at $14.78 today.
For comparison, the S&P/ASX 200 Index (ASX: XJO) is down 5% year to date. Beyond that, stock in travel peers Webjet Limited (ASX: WEB) and Qantas Airways Limited (ASX: QAN) have jumped 14% and 19%, respectively, this year.
So, with hopes of a 2022 recovery dwindling, could the Flight Centre share price be a 2023 turnaround story? Let's take a look at what experts think.
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Could 2023 be a better year for the Flight Centre share price?
Unfortunately, a major turnaround for the Flight Centre share price in the new year seems unlikely, according to many brokers and experts that tip the ASX 200 travel stock a hold.
One major factor dictating their concern is the company's revenue margin, which remained steady over the first four months of this financial year at 9.8% despite its total transaction value (TTV) leaping 246%.
The company's revenue margin was weighed down by reduced front-end commission payments from certain airlines. While it's working to offset such changes, it predicts they will drag on its Australian leisure margins by around 1%.
Qantas was among the first to slash commissions, dropping those for international flights from 5% to 1% earlier this year.
Top broker Goldman Sachs responded to the company's latest earnings update, adding:
While there are undoubtably temporary factors impacting [margins recovery] … we remain concerned regarding longer term structural move towards online, which are weaker margin channels.
The broker has a neutral rating and a $16.10 price target on Flight Centres shares.
Barrenjoey and JPMorgan are also among those with hold or equivalent ratings on the stock, the Australian Financial Review reports, while Jarden has slapped it with an overweight rating. The trio expect it to rise to $17.90, $16.50, and $21.20, respectively.
The latter broker has said the business could provide greater returns in the future, being larger once it recovered from the pandemic and offering an attractive balance of risk versus reward.
However, short sellers might disagree. Flight Centre is the most shorted share on the ASX, as it has been for most of this year. More than 14% of its stock was in the hands of short sellers at last count.
