Is Flight Centre FLT and Webjet WEB still a good buy

Pandemic

With ongoing Pandemic; COVID-19 has affected multiple industries. From lower economic activity hitting the economic cycle and the cyclical sector, the social distancing led tourism to a halt globally. With airlines not operating, borders closed for entrants & shipments; the tourism industry has been on a brisk of default.

The Pandemic, having started back in the CY19 end, took its peak between the Feb to April in CY20 – and then, the precautions happened. People are staying in-doors, close to none commercial activity and no travelling around the world and hitting the hoteling industry, the airline industry and all other related companies which offer services in complement to the aforementioned sectors.

With changing cycles and depressed situations come opportunities to invest into. This is exactly what we are going to do here – find out stocks for you, which could have an exceptional future ahead.

In this article, we are going to consider the Flight Centre and Webjet stocks listed on the ASX.

The Flight Centre and Webjet are two leading large retail travel agencies of Australia. Flight Centre Travel Group (Referred to as FLT from now on due to its listing code) is one of the world’s largest travel agency groups, having more than 2000 leisure, corporate and wholesale businesses in Australia and other 11 countries.

Webjet (from now on referred to as WEB due to its listed symbol) is another travel agency in Australia in New Zealand with its headquarters in Melbourne, Australia. It provides lodging services within the travelling industry via its WebBeds division. Having its operations in the base countries and North America, Singapore and Hong Kong, it plays its part with the use of technology to provide customers with the best experience.

Change in 2020

As the Pandemic went on to affect the tourism industry, FLT and WEB both took immense hits. Below is the summarized table:

LISTING CODEFLTWEB
HIGH (JANUARY 2020)$40.72$10.62
LOW (APRIL 2020)$8.56$2.25
CURRENT PRICE (JULY 24, 2020)$10.88$3.08
% CHANGE FROM JAN’20 HIGH TO APR’20 LOW-79.0%-78.8%
% CHANGE FROM LOW TO CURRENT27.1%36.9%
% CHANGE FROM JAN’20 HIGH TO CURRENT-73.3%-71.0%

Let’s now look at both the stocks graphically:

Figure 1 – FLT 2007 to date, extracted from Investing.com. Available at: https://tvc-invdn-com.akamaized.net/data/tvc_3ef911a1bec8b262f95dd80538cfc61e.png

Looking at the graphical representation of FLT, it is clear that the levels that FLT currently trades at have not been witnessed since the Financial Crisis in 2009. From that low in 2009 of $3.70, FLT provided a rally to $55.72 in 2014 which was 15.1x for a return to any investor who had managed to buy the bottom.

Figure 2 – WEB 2012 to date, extracted from Investing.com. Available at: https://tvc-invdn-com.akamaized.net/data/tvc_1b8a2c36657e133dc9c35c2f95dc8caa.png

Looking at the chart above (Figure-2) for WEB, we can see that the sell-off that started in Jan’20 led the stock to retrace its price to the levels that were last seen in CY14-15 and act as an excellent demand zone for the stock. This is an incredibly supportive zone for the stock.

Figure 3 – Correlation of ASX Ordinaries with FLT & WEB, extracted from Investing.com. Available at: https://tvc-invdn-com.akamaized.net/data/tvc_c9f6ff7cc1164081b3647ec177e286dc.png

The above chart shows that correlation of ASX Ordinaries to the two stocks of choice – FLT and WEB. There has been a good correlation of the two stocks with the ASX Ordinaries. However, there has been a mismatch in recent times – since the Pandemic began. This as well because there has been no support to the sector with the general population still avoiding to travel and the major of the tourism destinations not inviting tourists to visit.

Finally, tourism is likely to regain it’s momentum as the travel restrictions start to ease, and people learn to live with the Virus. Borders all around the world are either already in the process of opening for tourists or have provided the date for opening-up for the general public with the required SOPS. Given that the activity goes back into the process of going normal, there is likely going to be massive pressure on the tourism industry because a lot of people have been stuck for the past few months. The frustration of being locked would most likely call-in freedom of travel on a larger scale. This would result in FLT & WEB being beneficiaries because of the services they offer related to travel & tours.

Even on the charts, for FLT and WEB, there have been some massive volumes witnessed at the recent bottom suggesting that the long-term players are active into the play – most likely. Plus, the current levels of both the stocks are too lucrative to let go. The two shares currently trade into a trajectory of such price ranges which have not been witnessed in years (2014 and 2009 for FLT and WEB respectively) and remain a secure buy zone.

For me, this is the best time to look into these stocks – this opportunity lost would mean missing out on a bull market rally that could provide me many folds return that I would not want to miss.

Disclaimer: Historical price movements do not confirm the upcoming moves – it is all based on the views of the author, where he prepares his analysis using his skills & expertise. Investing does not necessarily always mean huge profits; it could result in capital losses as well. One must always consult his independent financial adviser before making any financial decision.

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