Webjet (WEB) share price lower after saying near term revenue will be modest

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    The Webjet (ASX:WEB) share price has fallen 8 cents or 2.2% to $3.49 after the online travel company confirmed as a result of the COVID-19 pandemic, total revenue in April and May 2020 were nominal.

    In an ASX announcement in which the company said it was launching an offering of €100 million (approximately A$163 million) convertible notes due 2027, the Webjet Managing Director John Guscic said the notes are expected to increase the company’s financial and strategic flexibility.

    “We continue to believe the strength of Webjet’s capital position in the current uncertain environment will provide a strategic advantage longer term, enabling the Company to execute its strategy and take advantage of opportunities as they arise,” said Mr. Guscic.

    In a trading update, Webjet said its monthly operating expenditure and other costs have averaged around $15 million per month from April 2020 to the end of June 2020, a reduction of approximately $13 million from pre COVID-19 expenditure.

    It went on to say that while Webjet has started to see some booking activity in its Australian OTA and WebBeds businesses, the company anticipates that any revenue contribution in the near term will be modest only, until the COVID-19 situation improves and broad-based travel activity resumes.

    As of 31 May 2020, Webjet had cash and cash equivalents of $215 million.

    In June, when Webjet shares were trading at $3.90, Morgan Stanley downgraded the stock to “underweight” from “equal weight,” saying it preferred fellow travel company Corporate Travel Management.

    The broker put a target on the Webjet share price of $3.30.

    Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
    Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au