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Webjet shares crash 11% lower on coronavirus concerns and broker downgrade

James Mickleboro
Share price plummet

The worst performer on the S&P/ASX 200 index on Tuesday has been the Webjet Limited (ASX: WEB) share price.

The online travel booking company’s shares are down 10% to $12.90 at the time of writing. They were down as much as 11% in earlier trade.

Why is the Webjet share price crashing lower?

There have been a couple of catalysts for the sharp share price decline on Tuesday.

The first is the coronavirus outbreak. Investors have been selling travel shares amid concerns that the outbreak could put pressure on travel bookings in the near term.

Especially in China, which is a very important part of the global travel market. In Australia, for example, China is the leading source of short term visitor arrivals. In November 120,200 Chinese nationals visited Australia. This is almost double the number of people visiting from the United States.

But with a number of cities in China placing restrictions on travel in an effort to contain the virus and the U.S. recommending travellers avoid the country altogether, global tourism could take a hit in 2020.

This would be bad news for travel bookers such as Webjet and rivals Corporate Travel Management Ltd (ASX: CTD) and Flight Centre Travel Group Ltd (ASX: FLT).

Broker downgrade.

Another catalyst for Webjet’s sizeable decline appears to be a broker note out of Morgan Stanley this morning.

According to the note, the broker has downgraded Webjet’s shares to an underweight rating and slashed the price target on them by almost 20% to $10.00.

Morgan Stanley made the move due to concerns that tech giant Google could be negatively impacting its B2C business.

It notes that travel giants Expedia and TripAdvisor have both blamed Google for reductions in their earnings and outlooks. As a result, it appears concerned Webjet may have to increase its marketing costs and give away margin in order to compete.

The post Webjet shares crash 11% lower on coronavirus concerns and broker downgrade appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Flight Centre Travel Group Limited. 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. 2020