Webjet’s shares have been on form this week…
The post The Webjet (ASX:WEB) share price is up 5% in the last week appeared first on The Motley Fool Australia. –
The Webjet Limited (ASX: WEB) share price has continued its positive run on Friday.
At the time of writing, the online travel agent’s shares are up 3% to $5.91.
This means the Webjet share price is now up over 5% this week.
Why is the Webjet share price outperforming?
Investors have been bidding the Webjet share price this week after it released a trading update on Tuesday.
According to that update, the company’s key WebBeds business returned to profitability in recent months.
This was driven by a strong rise in WebBeds total transaction value (TTV) over recent months and particularly in July.
For example, management notes that its WebBeds TTV was as low as $18 million in February. It then recovered to reach $55 million in June, before catapulting to $96 million in July. Importantly, the latter is just ahead of its break-even point.
The good news is that the recovery has continued since then with a further improvement in August. Management was expecting the business to record TTV of $113 million last month.
And while this is still only approximately 50% of WebBeds’ pre-COVID TTV levels, its cost reductions have made the business profitable at this level.
This of course means that when its TTV reaches pre-COVID levels again, its business will be significantly more profitable than it was previously. This could bode well for the Webjet share price in the future.
What else did the company announce?
Also giving the Webjet share price a boost was management’s comments on what the above means for the whole company.
Webjet’s Managing Director, John Guscic, explained: “Our post-Covid strategy is delivering results and the Company will be operating cash flow positive for the first half of Financial Year 2022. The WebBeds business was profitable in July and August and is well on track to be profitable in September.”
The prospect of its cash burn coming to an end is a big positive for the Webjet share price. This is because any excess cash could be used to create value with acquisitions or capital returns.
Can its shares go higher?
The team at Goldman Sachs were pleased with the company’s update. In response they retained their buy rating and $6.40 price target on its shares.
Based on the current Webjet share price, this implies potential upside of 8% over the next 12 months.
Should you invest $1,000 in Webjet right now?
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.