Flight Centre Share Price Recovering, but Is It a Buy? (ASX:FLT)

In what can only be described as a disastrous year for the company, there might just be some light at the end of the tunnel.

Flight Centre Travel Group Ltd [ASX:FLT] saw its share price rise by 3.40% to $13.37 at the time of writing, on the back of news that some borders in Australia could be opening soon.

ASX FLT Share Price Chart 1

Source: Optuma

What’s happening at Flight Centre?

COVID-19 bought everything to a griding halt for Flight Centre back in January.

The federal and state governments announced border closures along with travel restrictions being put in place globally.

Impacting everything travel and holiday related.

For a company that specialises in the travel sector, the fall out is spectacular, with the company recently announcing their results:

  • $510 million underlying loss before tax during FY20 (FY19: $343.1 million PBT)
  • $849 million actual (statutory) FY20 result (FY19: $343.5 million PBT) including circa $340 million in one-offs (mainly noncash)
  • $102.7 million underlying 1H PBT achieved and tracking near $150 million during eight months to 29 Feb 2020
  • Losses incurred in March and throughout Q4 TTV heavily impacted by COVID-19 restrictions
  • $15.3 billion result achieved during FY20 (FY19: $23.7 billion)
  • Down 35.5% year-on-year after being up 11.2% at 31 Dec 2019
  • Limited revenue generation opportunities while heavy domestic and international travel restrictions were in place globally

The company reacted quickly to the circumstances and raised $900 million. $700 million via a capital raising and a $200 million debt facility increase as the company moved to cut costs.

Where to from here for Flight Centre?

From the COVID-19 announcement in January, the price dropped over 67% and has largely moved sideways.

ASX FLT Share Price Chart 2

Source: Optuma

Victoria is one of the hardest hit states of the virus, with major lockdowns in place and all other states closing their borders to Victorians.

Now other states are looking to reopen borders in the coming weeks, and it couldn’t come at a better time for Flight Centre.

Flight Centre Share Price Chart 3

Source: Optuma

When the border restrictions are lifted, with any luck people will get moving around the nation again and naturally turn to businesses like Flight Centre. Bringing money back in could be a boost to their stock price.

In the short term, should the price fall back any further, then the level of $9.76 may be strong enough to halt a further fall.

If the price moves to the upside, when people get traveling again, then the levels of $14.70 and $17.89 may be the next target prices to come into focus.

Are FLT shares a buy?

Pre-pandemic, everyone loved to travel, see family and friends, do business, and nothing about that has changed, just right now there is a health crisis stopping us all.

If the opening of shops in bars recently in Melbourne is anything to go by…once the travel restrictions are lifted people will be itching to get out and explore again, and Flight Centre may be a very good stock for a watchlist when this does happen.

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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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