Now could be the time to pounce on Webjet Limited (ASX: WEB) shares.
That's the view of analysts at Goldman Sachs, which believe that the recent sell-off is "overdone."
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What is the broker saying about Webjet shares?
According to the note, the broker has been looking at the travel sector and highlights that the normalising of travel growth has resulted in a number of shares pulling back materially from recent highs.
While the broker acknowledges that industry data is mixed, importantly for Webjet, it points out that the data shows that "hotel demand remains robust, supported by still recovering international travel."
In light of this, the broker has upgraded Webjet shares to a buy rating with an improved price target of $8.30 this morning.
Based on the current Webjet share price of $6.49, this implies a potential upside of 28% for investors over the next 12 months.
3 reasons to invest
Goldman has outlined three key reasons why it is bullish on Webjet. These include its strong cash generation, structural growth opportunities, and large total addressable market for its OTA business. The broker explains:
Our Buy thesis on WEB is premised on 1) WEB demonstrating strong cash generation as the market recovers while current valuation continues to be impacted by macro concerns 2) We believe WEB's Bedbanks business offers a structural growth opportunity and expect it to drive scale benefits, underpinned by system changes and ERP upgrades as WEB goes through the recovery cycle. 3) We believe the OTA business is exposed to the right channels with the ongoing shift towards digital bookings likely to aid WEB in growing its TAM as well as market share. We see the recent pull back in share price as an attractive entry point.
