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Is the Flight Centre (ASX:FLT) share price good value?

The Flight Centre Travel Group Ltd (ASX:FLT) share price fell heavily on Thursday. Is this a buying opportunity for investors?
The post Is the Flight Centre (ASX:FLT) share price good value? appeared first on The Motley Fool Australia. –

The Flight Centre Travel Group Ltd (ASX: FLT) share price was out of form on Thursday.

The travel agent giant’s shares were down as much as 8% at one stage before ending the day with a 2.5% decline to $14.93.

This means the Flight Centre share price is down almost 7% year to date.

Why did the Flight Centre share price tumble on Thursday?

Investors were selling Flight Centre and Webjet Limited (ASX: WEB) shares following the release of an update from Qantas Airways Limited (ASX: QAN).

Although the airline operator revealed a significant improvement in its performance, its comments on travel agent commissions shocked investors.

Qantas advised that it is aiming to reduce its costs of sale by lowering front-end commissions paid to travel agents on international tickets from 5% to 1%. Investors appear concerned that other airlines will follow suit, hitting travel agents hard.

One broker that isn’t concerned by the news is Goldman Sachs.

It commented: “We make no changes to our earnings forecasts on either name [Flight Centre and Webjet] and do not expect this to become a broad-based phenomenon across all airlines, although it remains a key risk factor. We believe that Travel Agents will remain a key link to the airline distribution supply chain and although commission models may be restructured, we do not anticipate a strong permanent margin compression for these players.”

Is this a buying opportunity?

While Goldman Sachs continues to rate Webjet’s shares as a buy, it still isn’t recommending Flight Centre’s shares as a buy. This is despite its price target being well beyond current levels.

According to the note, the broker has retained its neutral rating and $20.00 price target on its shares. Goldman also notes that there are a number of upside and downside risks for investors to consider.

For the former, it sees a faster-than-expected recovery in trading environment, significant market-share gains in the online channel, and travel bubbles as potential upside risks.

Whereas key downside risks to consider are the potential emergence of COVID-19 strains which could make vaccines less effective, further decline in brick-and-mortar travel sales, increased competition in the corporate segment, and industry-wide reductions in travel agent commissions.

Food for thought for investors.

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More reading

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Why Flight Centre (ASX:FLT) and Webjet (ASX:WEB) shares are being hammered today
ASX 200 up 0.95%: Qantas update, Nufarm’s profits surge

The post Is the Flight Centre (ASX:FLT) share price good value? appeared first on The Motley Fool Australia.

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