Given the improving outlook for the travel sector, investors may be wanting to gain exposure to this side of the market.
And while there are a number of options to choose from, two of the most popular ASX travel shares are Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB). But which one should you buy?
Should you buy Flight Centre of Webjet shares?
According to a note out of Goldman Sachs this morning, its analysts believe investors should skip Flight Centre and buy Webjet shares for travel sector exposure.
The note reveals that the broker has retained its buy rating and $6.90 price target on Webjet’s shares. Based on the current Webjet share price of $6.06, this implies potential upside of 14% for investors over the next 12 months.
Whereas Goldman has put a neutral rating and $20.40 price target on Flight Centre’s shares, which is broadly in line with where its shares are trading at present.
What did the broker say?
Goldman notes that the Omicron outbreak appears to be past its peak in most key markets. This has led to travel activity continuing to progress positively. In light of this, it is sticking with its original view that Omicron will only be a temporary speed bump in the sector’s recovery.
Goldman said: “CY22 began slowly due to Omicron, but we note strong progress in flight search data into early February. TSA passenger traffic numbers have largely stabilized as a percentage of the same metrics as in 2019. We reiterate our expectations that Omicron causes a temporary drop in travel interest but returns quickly.”
In respect to Webjet, Goldman Sachs believes it will be a stronger player post-pandemic.
The broker said: “We are Buy rated on WEB, which we expect to come out stronger on the other side of the pandemic with growth potential both in the B2B and B2C spaces. WEB also maintains a strong balance sheet with c. 24 months of runway (from September 2021) at zero activity levels.”
And while the broker has a positive view of Flight Centre post-pandemic and expects a 100% increase in revenue for the first half, it feels its shares are fully valued at the current level and thus holds firm with its neutral rating.
Time will tell if the broker makes the right call.
