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UBS raises Webjet stock target, maintains buy rating

EditorAhmed Abdulazez Abdulkadir
Published 23-05-2024, 10:22 pm
WES
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On Thursday, UBS analyst Tim Plumbe upgraded the price target for Webjet Limited (WEB:AU) (OTC: WEBJF) to AUD10.60, up from the previous AUD10.00, while reaffirming a Buy rating on the stock. The revision follows Webjet's reported revenue increase of 29% year-over-year and a 40% rise in EBITDA, aligning with UBS and consensus estimates.

The analyst highlighted Webjet's B2B segment as particularly impressive, with total transaction value (TTV) growing by 30% in constant currency terms for the fiscal year 2024 and accelerating to 35% in the first seven weeks, surpassing the company's target TTV growth of 25% for fiscal year 2025. This performance suggests a potential 10% upside to UBS's FY25E EPS if B2B growth maintains at 35%.

Webjet's ongoing B2B conversion rate improvements from existing customers are expected to bolster confidence in achieving the long-term target of $10 billion TTV. UBS's FY30E TTV estimate stands at $8.7 billion, indicating that reaching the $10 billion mark could lead to a 5% to 8% increase in FY27E EPS compared to UBS and consensus estimates, and a 15% increase in FY30E EPS according to UBS projections.

The report also pointed to a softer domestic demand and ticket prices impacting the B2C TTV, which was more than compensated for by higher margins from international bookings and contributions from TripNinja. UBS's preliminary Sum-of-the-Parts (SoTP) analysis suggests a potential 14-35% stock price upside from the last close if a B2B/B2C demerger were to occur, applying EV/EBITDA multiples of 9-11x for B2C and 19-23x for B2B.

Lastly, the analyst noted Webjet's strong cash position, with $630 million in cash and $406 million in net cash, which could allow for future capital management initiatives. Despite exposure to consumer spending, UBS remains positive on Webjet, citing market share growth opportunities in both B2B and B2C segments and productivity gains as key drivers.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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