What Coronavirus Means for the Webjet Share Price (ASX:WEB)

Webjet Limited [ASX:WEB] is a digital travel business spanning both the global consumer markets and the wholesale markets. Headquartered in Melbourne, Victoria, the $589 million company has been hammered by the emergence of COVID-19, pushing the Webjet share price down to $4.35 at time of writing.

Their operations include the online sale of travel products, including flight tickets and hotel rooms.

ASX WEB - Webjet Share Price

Source: Optuma

Growth of Webjet share price and subsequent impact of coronavirus

On 19 February 2020, Webjet their first-half performance update for 2020. The company projected strong growth across the business with flight bookings up slightly and the Webbeds arm of the business, projecting booking up 78% from 1H19, with overall revenue up 24% to $217.8 million.

This all changed in March with Webjet withdrawing their financial earnings guidance for 2020.

With Covid-19 placing downward pressure on bookings, we are focused on mitigating the short-term impact to earnings but importantly, we remain intent on retaining our leadership positions in our global WebBeds,’ Managing Director John Guscic noted.

As part of the cost reduction program, Managing Director John Guscic and the Board of Directors have voluntarily agreed to reduce their salary and Directors’ fees by 20% with immediate effect until conditions return to normal. The Managing Director has also agreed to forgo any bonus that would have been achieved in FY20.

Will Webjet share price take off again?

Recording a high of $14.63 close to the end of January 2020, the price has now collapsed and fallen over 70% to $4.35, much like Flight Centre Travel Group Ltd [ASX:FLT], which we covered in a recent article.

ASX WEB - Webjet share price

Source: Optuma

At time of writing, the Webjet share price looked to be in free fall smashing through the historical resistance level of $5.10 and may fall to $2.65, which would represent a fall of over 81%, should this happen as can be seen below:

ASX WEB Share Price Chart 3

Souce: Optuma

With this in mind, the short-term outlook for Webjet is a grim picture, but it is interesting to note that both Macquarie Group and Vanguard Group and have become substantial holders, holding 5.42% and 5.00% respectively.

Once the globe emerges from the Coronavirus pandemic, Webjet may be well-positioned to bounce back strongly due to its 2019 growth and confidence from large investors.

Regards,

Carl Wittkopp,

For Money Morning


Carl Wittkopp writes for Money Morning and has a diploma in Financial Planning. He specialises in technical analysis.


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