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Webjet share price down 6% on Thomas Cook concerns

James Mickleboro
Qantas, travel, plane,

The market may be storming higher on Monday following the Federal election, but not all shares have been able to follow suit.

One of the worst performers on the S&P/ASX 200 index today has been the Webjet Limited (ASX: WEB) share price.

In afternoon trade the online travel agent’s shares have dropped over 6% to $15.74. At one stage they were down as much as 7% to $15.60.

Why has the Webjet share price tumbled lower today?

With no news out of the company, today’s decline appears to be attributable to news relating to its strategic partner Thomas Cook in the United Kingdom.

On Friday the Thomas Cook share price crashed 40% lower amid concerns that the travel company could struggle to make it through the northern hemisphere’s summer holiday season.

Last week Thomas Cook made its third profit warning in less than 12 months after reporting a massive £1.5 billion half-year loss. It also provided a bleak outlook and warned that summer bookings are down 12%.

According to the Financial Times, this led to analysts at Citi suggesting that its shares were “worthless”. The broker suspects that the company will require a capital restructuring via a new share issue or debt for equity swap.

And unfortunately for Webjet, the broker believes that concerns over the viability of the Thomas Cook business could “unsettle consumers and drive further weakness in bookings.”

In 2016 Webjet paid Thomas Cook £21 million to enter a supply agreement which saw Webjet’s European online accommodation business service the wholesale market and take responsibility for the majority of the volume of Thomas Cook’s complementary hotel business.

Though, it is worth noting that this weakness has yet to have any impact on Webjet’s performance in FY 2019. Last month the company presented at the Macquarie Group Ltd (ASX: MQG) conference and reconfirmed its full year EBITDA guidance of at least $120 million.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019