Why The Webjet (ASX:WEB) Share Price Is Moving

The Webjet Limited (ASX: WEB) share price has been on watch this week following coronavirus concerns, an investment analyst report and a corresponding announcement. Here’s what you need to know.

Aside from overall market weakness and coronavirus concerns, this fall was seemingly amplified by an investment analyst’s report which downgraded its price target for Webjet shares and highlighted web traffic concerns.

This morning, Webjet responded with a report of its own. Here’s what you need to know.

What’s Happened?

The beginning of the week saw a sell-off on the ASX, with the S&P/ASX 200 (INDEXASX: XJO) closing 1.4% lower on Tuesday. Amid the sell-off, Webjet shares were hit especially hard, falling 14%.

Aside from overall market weakness and coronavirus concerns, this fall was seemingly amplified by an investment analyst’s report which downgraded its price target for Webjet shares and highlighted web traffic concerns.

Webjet released an announcement yesterday that sought to clarify what it considers to be inaccuracies included in the analyst report.

According to Webjet:

  • The data stating that 65% of the traffic for Webjet’s online travel agency (OTA) division comes from search engines at a low cost is incorrect
  • Google’s intentions, as interpreted in the report, do not present a material threat to the current traffic or bookings volumes.
  • Regardless of source, traffic alone is not a proxy for Webjet OTA’s bookings or earnings growth, and has never been presented as such by the company

Webjet’s Booking Sources

To provide further detail, Webjet went on to present a breakdown of OTA’s booking sources, which are as follows.

Direct Channels – 33%

Webjet considers direct channels to include typing webjet.com.au into a browser address bar, email marketing, and Webjet Apps.

For these bookings, customers have specifically chosen Webjet and as a result, the company does not believe direct channels are impacted by any proposed behaviour by Google mentioned in the analyst report.

Paid Brand Search – 27%

According to Webjet, this occurs when a customer types “Webjet” or a similar term in a search box and clicks on a paid advertisement that directs them to the Webjet website.

Once again, the customer is searching directly for Webjet, however instead of going to the Webjet website directly, they are using Google as a navigation tool to get there, by way of an ad.

Paid Non-Brand Search – 18%

Webjet’s distinction between paid brand search and paid non-brand search lies in the search term a customer types into their browser.

An example of paid non-brand search would be when a customer types a generic term into their browser such as “flights to bali” and then clicks on a paid advertisement for Webjet.

Organic Search – 22%

The remaining 22% of Webjet OTA’s bookings are split into two categories — Organic Brand (14%) and Organic Non-Brand (8%).

Organic Brand is where a customer types “Webjet” or a similar term into the search box and receives an organic result (i.e. not an advertisement) that directs them to the Webjet website.

Organic Non-Brand is where a customer types a generic search term into their search browser such as “flights to bali” and clicks on an organic Webjet result.

So, while the analyst report estimated 65% of Webjet’s traffic came from low-cost search engine results, Webjet sought to clarify that this figure was more like 8%.

“Webjet OTA captures 8% of its bookings from the Organic non-brand category, not the 65% that the report implies”, the announcement read.

What Next?

The Webjet share price bounced back yesterday, as did the overall ASX sharemarket.

Webjet shares were last trading 5.43% lower today at $12.20.

The question of whether Webjet shares are expensive, cheap or somewhere in between lies primarily in valuation.

How do you value an investment? What does your process look like? Do you really understand what you’re investing in and why?

You should know, we’ve just asked our expert analysts to put together a FREE valuation course and make them available to investors like you, for a limited time.

Complete with downloadable Excel models, templates and valuation tools, simply click here to access the course.

It’s completely free!

180 / 182