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Why Flight Centre shares are soaring again

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Why Flight Centre shares are soaring again

The good news on coronavirus vaccines has boosted the value of travel stocks, like Flight Centre (ASX:FLT), Webjet (ASX:WEB) and Corporate Travel (ASX:CTD). While a return to normal is still a fair way off, many investors clearly don’t seem to mind, and are looking ahead to better times. So, are they being realistic, or is this a case of irrational exuberance?

I had previously written on FLT following its capital raising in the early days of the coronavirus pandemic, where the outlook remained extremely uncertain and society was still trying to understand the longer-term implications of coronavirus on areas like travel.

Around the time of the blog post and immediately after the capital raising, Flight Centre shares had spiked up to $14 before drifting back down to $10 in May. In the heady days of early June when the reopening trade was the craze, Flight Centre shares again soared, this time to above $17, before a sudden change in sentiment caused by a realisation that COVID-19 was here to stay (at least in the Northern Hemisphere) saw it drift back down to $10.

With the various positive news on vaccines, however, we have seen FLT again rise – hitting $18 per share last week. It is arguable that the rally in the shares this time is more sustainable – an effective vaccine within the next 12-24 months appears significantly more likely rather than a possibility. Question marks remain on the duration profile and longer-term safety, but investors have assumed these are likely to be addressed with science.

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Joseph is the Portfolio Manager of The Montgomery Fund and Head of Fundamental Research. Joseph has over fourteen years’ experience in equities research, funds management and M&A. Before joining Montgomery, he was a Senior Analyst at Colonial First State Global Asset Management responsible for coverage of resources, energy, infrastructure and industrials sectors. Joseph’s prior experience includes roles in equities research at JP Morgan and at Ellerston Capital.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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2 Comments

  1. Hmmm. I am one of those FLT “holders”. My avg. cost price was $39 when I decided to buy a little more in Oct 2019 and after I had seen the share price rise to $66- at one point. After the share price appeared to plummet earlier this year I bought more at nearly $25 and more again at under $17. Just small amounts but the fall wasn’t over yet. The only way I could see making a better investment in FLT was to look longer term again (that’s why I was in it to start with anyway), so I participated in the SPP offer at $7.20 – my avg. cost price is now just over $23 so still at a loss. No dividend I saw as bearable and sensible as they had splurged out and paid a large Special Dividend in the previous year. Anyway I HOLD and wait and see. I’m not quite a pensioner yet and have some time – but not a lot of capital – hoping that this (I feel) well run company will survive and do even better in the post-COVID online (more than ever) world. It sure has been a RIDE. Thanks for your articles on this and other insights. Merry Christmas to all and a Happy and Prosperous New Year (hopefully) in 2021.

    • Hi Sue,
      Many thanks for your comment and for reading the articles.
      I agree the company has been well run for the most part, but obviously have been hit with something completely out of their control. I for one am looking forward to being able to get back overseas for a holiday, and I don’t doubt there is plenty of pent up demand there for the travel companies to prosper looking beyond COVID – one way or another!

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