Has travel stock had its run now, or will the post-COVID industry revival bring more joy to shareholders?
The post Is it too late to buy Qantas (ASX:QAN) and other ASX travel shares? appeared first on The Motley Fool Australia. –
During last year’s first wave of COVID-19, ASX travel shares were undoubtedly a bargain.
The likes of Qantas Airways Limited (ASX: QAN), Corporate Travel Management Ltd (ASX: CTD), Webjet Limited (ASX: WEB) and Flight Centre Travel Group Ltd (ASX: FLT) saw their share prices crash in March 2020.
But they clawed back some lost ground in a matter of weeks as investors realised sooner or later travel would resume.
They were boosted further at the end of last year when the news of vaccines filled everyone with hope.
But with much of Australia now held hostage by the Delta strain of coronavirus, are these stocks still worth buying?
Or are their share prices now fully priced for the re-opening trade?
Qantas is cleared for further altitude
The share price for the Flying Kangaroo closed Friday 1.47% up at $5.53. Qantas shares have gained almost 39% in the last 12 months.
According to Switzer Financial director Paul Rickard, brokers are targeting $6, suggesting another 9% upside.
“It’s used the pandemic to really transform its cost base. It has reset its international program. And we’ve seen with the collapse of Virgin… its share of the domestic market has also changed for the better,” he told Switzer TV Investing.
“I think there’s a bit more left in Qantas.”
Qantas chief executive Alan Joyce reckons Australians will be flying overseas by the end of the year, which is only 3 months away.
He’s betting that Australia will nationally reach 80% vaccination coverage by then, and that will prod the federal government into removing border restrictions.
Rickard did warn that brokers aren’t expecting Qantas to regain profitability until the 2023 financial year at the earliest, and not return to pre-COVID numbers until 2024.
Will Australians visit travel agents anymore?
Rickard is more circumspect about the future of Flight Centre.
“The whole travel agent model. Just what happens to that going forward?”
Flight Centre shares touched the $60 mark back in 2018. It closed Friday at $18.43.
“They’ve laid off a lot of staff, closed a lot of branches — so their cost base is in a much better position,” said Rickard.
“But I’m not sure we’re going to get back to $60 anytime soon. It’s not my number 1 stock in this area.”
Webjet is in a similar position, with Friday’s closing price of $5.92 not that far away from brokers’ target of $6.02.
But it has a cushion that might soften the blow compared to Flight Centre, said Rickard.
“It’s more dependant on corporate travel than perhaps the retail market.”
A little bit of room to travel for Corporate Travel shares
Shares for Corporate Travel Management was down 0.28% on Friday, to close the day at $21.36.
The stock has gained just under 30% in the past year.
According to Rickard, Corporate Travel Management shares have a broker price target of $23.65.
“I think they’ve really survived because they’re much more global in orientation and they’re getting good business overseas,” he said.
“Certainly the market has liked this stock — very much so over the last 12 months.”
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Motley Fool contributor Tony Yoo owns shares of Corporate Travel Management Limited, Qantas Airways Limited, and Webjet Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.