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Why the Flight Centre share price can outperform over the next 2 months

Brendon Lau
pilot, flying, flight, aircraft, plane, webjet, flight centre

The Flight Centre Travel Group Ltd (ASX: FLT) share price is outperforming today but its take-off may have only just started with a leading broker forecasting more tailwinds over the next two months.

The FLT share price jumped 2.3% to $45.04 in the last hour of trade when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index rallied 1.8%.

It isn’t the only stock in the sector taking to the skies though. The Webjet Limited (ASX: WEB) share price climbed 1.6% to $13.00 while the Corporate Travel Management Ltd (ASX: CTD) share price added 2.6% to $20.49 at the time of writing.

More gains in the short run?

But it’s Flight Centre that’s under the spotlight as Morgan Stanley is predicting the stock to outperform the sector over the next 60 days.

“Recent macro uncertainty has hampered FLT’s operating results and sentiment on the stock,” said the broker.

“Our global macro team is now expecting a recovery in global growth to take hold from 1Q20.”

Beneficiary of Brexit and US-China trade deal

The improving macro outlook comes as the US and China strikes a small buy symbolic trade deal and the UK hands the conservative government a parliamentary majority.

Trade tensions between China and the US may not be over, but the outlook for economic growth in 2020 is looking decidedly brighter. That can only be good news for the travel sector.

Meanwhile, the end of the political stalemate in the UK increases the chance that the country can hammer out a divorce settlement with the European Union. This too bodes well for global economic growth

UK economy on the comeback

“Our UK macro team expects growth should pick up on fiscal stimulus and orderly resolution of the exit talks,” added Morgan Stanley. “We think this should support FLT’s share price in the near term.”

The broker estimates that there is a 60% to 70% chance of Flight Centre outperforming through to mid-February.

Foolish takeaway

But one has to wonder if the stock may have run ahead of fundamentals with today’s big gain. While Morgan Stanley is recommending the stock as “overweight”, its target price on Flight Centre is $43.00 a share.

That’s below where the stock is currently sitting.

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The post Why the Flight Centre share price can outperform over the next 2 months appeared first on Motley Fool Australia.

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Motley Fool contributor Brendon Lau owns shares of Webjet Ltd.

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. 2019