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Why the Webjet share price dropped lower today

James Mickleboro
Corporate travel jet flying into sunset

The Webjet Limited (ASX: WEB) share price has just finished the week on a disappointing note.

The online travel agent’s shares fell around 4% at one stage before ending the day 1.5% lower at $12.65.

Why did the Webjet share price drop lower today?

The Webjet share price came under pressure on Friday after the release of a trading update from rival Flight Centre Travel Group Ltd (ASX: FLT).

This afternoon Flight Centre updated the market in relation to its first half results and its outlook for FY 2020.

According to the release, the company warned that the emergence of the coronavirus in Asia could have a negative impact on its Greater China and Singapore corporate travel businesses.

In light of this, management acknowledges that it will be more difficult to deliver the strong second half earnings weighting implied in its full year guidance.

The company’s managing director, Graham Turner, said: “While it was too early to predict the virus’s overall impact, it had already adversely affected FLT’s small corporate travel operations in China, Singapore and Malaysia, which together generated about $625million in TTV during FY19 (about 2.5% of group TTV).”

Furthermore, it has concerns over the corporate travel market in general after companies across all geographic regions amended their travel policies following the outbreak.

Flight Centre also warned that leisure travel could be impacted if the virus spreads globally and hotel bookings may soften if Chinese tourists don’t travel overseas as normal.

What about Webjet?

Investors appear concerned that these factors will also weigh on Webjet’s performance in the second half of FY 2020.

Whilst this certainly could be the case, I feel these concerns are more than reflected in its share price.

In fact, with Webjet’s shares down 12% over the last couple of weeks and changing hands at just 19x estimated forward earnings, I think they have been severely oversold and represent great value for money. Especially given how the company has also comprehensively refuted concerns that the Google is disrupting its business.

In light of this, I would be a buyer of its shares when the market reopens on Monday.

The post Why the Webjet share price dropped lower today 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 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