The following is an extract from our complete client report earlier in the week:
WEB is well placed to continue benefitting from the growth in international bookings outpacing domestic bookings, as well as its ability to capture the shift to booking international travel online, in light of the Company’s increased market share and presence.
The Company has previously experienced periods where it has struggled to gain market share in the core Webjet business, as a result of intense competition. While the latter remains a factor, the key factors underpinning the strong levels of TTV growth in core
Webjet business include:
i. The significant investment undertaken in technology and branding and
ii. The growth experienced in the Packages segment. As recently as a couple of years ago, the Company had modest success with Packages and since that time, this segment has grown significantly given that Packages are a logical extension of the aggregation of air and hotel supply, and Packages have migrated from a bricks-and-mortar model to online.
In light of the share price’s strong rally since the trading update last week, we consider that weakness from current levels would present a more attractive entry opportunity. We also note that a key share price catalyst is another accretive B2B acquisition, with the capacity for further acquisitions supported by the Company holding a net cash position of ~$30m on the balance sheet.
WEB was trending up nicely for the last year, most recently hitting that support line two weeks ago. From there it rallied impulsively, making 30% in 4 days. The stock is clearly looking bullish but we would like to grab it on a pullback instead of chasing it up here. There appears to be an obvious support level near $3.50, so if some short-term profit taking starts to take hold, then that would be the buy zone. We would then expect WEB to make a new high for the year, finding resistance near $4.50.