What’s going on with Webjet shares lately?
The post Why the Webjet (ASX:WEB) share price has fallen 10% in a month appeared first on The Motley Fool Australia. –
The Webjet Limited (ASX: WEB) share price has been on a disappointing run over the last month. This comes despite no news being released by the online travel agent since the middle of May – over 2 months.
At yesterday’s market close, Webjet shares finished the day down 1.26% to $4.69.
COVID-19 lockdowns hit the travel industry
The resurgence of COVID-19 cases in Australia is a likely catalyst for the recent downturn in the Webjet share price.
As the super infectious Delta variant spreads through communities, travel restrictions have returned, with some states closing their borders. This impacts companies like Webjet that rely on domestic travel to generate revenue.
A large number of cases across the states could mean that hard lockdowns will potentially remain for the coming weeks. Most notably, South Australia, is in the midst of one of the world’s harshest lockdowns, with level 5 restrictions in place.
Adding to the woes, New Zealand has enforced mandatory quarantine for most of Australia. This will also likely affect Webjet’s revenue stream as fewer people will be travelling internationally.
Fortunately, Webjet still has substantial cash reserves to survive the ongoing crisis that has put the travel industry in a tailspin. At its most recent update in May, the company stated it had $431 million pro forma cash on hand. This includes the net proceeds of $250 million in convertible notes completed in April 2021.
The average monthly cash burn rate stands at around $5.5 million, although this may change due to the unfolding situation. However, going off estimates, this provides Webjet with enough breathing space to run operations for the next 6.5 years without raising additional funds or drawing down on debt.
The company is scheduled to hold its annual general meeting (AGM) on 31 August.
Webjet share price summary
Over the last 12 months, the Webjet share price has lifted more than 60% since hitting near COVID-19 lows, but is still a long way off from 2019 levels.
Currently, the company’s share price is sitting in the middle of its 52-week range of $2.63 to $6.33.
Based on valuation grounds, Webjet has a market capitalisation of around $1.7 billion, with approximately 379 million shares outstanding.
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Motley Fool contributor Aaron Teboneras 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.