Stock of the day: Web Travel

(AI video summary)

This video was created on 28 May 2025 for IG audiences by ausbiz.

ASX code: WEB

Strong performance despite earnings decline

Web Travel posted underlying group earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $120.6 million for financial year 2025 down from $139 million the previous year. However, bookings surged 20% and travel spending increased 22%, while revenue rose 1%.

The company maintains a strong capital position post-demerger, holding $63.6 million in cash as of March. The completed $150 million share buyback program has further strengthened its financial position.

Market reaction and outlook

Despite a Morgan Stanley downgrade yesterday, Web Travel shares surged 15% following the results. The strong reaction suggests investors were overly pessimistic about the company's prospects.

The results represent the post-demerger business-to-business operation, focusing on Web Beds rather than consumer-facing Webjet. This positioning benefits from corporate travel recovery while avoiding retail booking volatility.

While EBITDA margins declined, analysts expect improvement as total transaction value (TTV) grows. The company's positive guidance during uncertain times signals management confidence.

Investment outlook

Trading at 20 times earnings with forecast earnings per share (EPS) growth of 17%, Web Travel appears fairly valued after today's surge. Analysts reckon positive momentum could continue but suggest waiting for consolidation before establishing new positions.

The performance may benefit related travel technology stocks, particularly SiteMinder, which has gained from $3.80 to $4.60. For current shareholders, analysts suggest holding while monitoring for pullback opportunities.