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This travel share could be a top option in October…
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Webjet Limited (ASX: WEB) shares are having a tough year.
Since the start of 2022, the online travel agent’s shares have dropped over 10% to $4.86.
This leaves the Webjet share price trading within sight of a 52-week low of $4.55.
The good news for shareholders is that one leading broker is tipping Webjet shares to rebound over the next 12 months.
In fact, its conviction is so strong that it has the travel share on its best ideas list for October.
These are the shares that the broker thinks offer the highest risk-adjusted returns over a 12-month timeframe and are supported by a higher-than-average level of confidence.
According to a note out of Morgans, its analysts have an add rating and $6.40 price target on the company’s shares.
Based on where Webjet’s shares are currently trading, this implies potential upside of almost 32% for investors over the next 12 months. Morgans is also expecting a modest dividend yield of almost 1%, increasing the total potential return slightly.
The broker is positive on Webjet shares due to their valuation and the company’s cost reductions. It expects the latter to lead to the company being a much more profitable business when trading returns to normal.
It explained:
Based on our forecasts, WEB is trading on an FY24 recovery year PE which is at a discount to its five-year average PE (pre-COVID). Its WebBeds (B2B) business is highly leveraged to the northern hemisphere summer holiday season which is forecast to be strong. Webjet OTA is leveraged to ANZ domestic and international travel. Management also wasted a crisis and cost reduction initiatives will reduce its cost base by 20% across the group once the business returns to scale.
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 has recommended Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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