What Happened to the Flight Centre Share Price?
Shares of Flight Centre Travel Group Ltd [ASX:FLT] fell more than 3% on Thursday, closing at the lowest level since January.
Why Did This Happen to the Flight Centre Share Price?
Following a downgrade by the company of its profit estimates, broking firm Morgans changed its recommendation on the stock from buy to hold. The broker also cut its price target for the stock from $56.55 to $50.50. The shares closed Thursday at $44.76.
What Now For Flight Centre?
June has been a bad month for Flight Centre shares. The stock opened the month above $50, but has sunk as the company lowered its profit estimate.
The share price is now back to where it was at the start of the year. The company expects to make a pre-tax profit of $370–385 million this year. Assuming a company tax rate of 30%, Flight Centre should record a net profit of around $259 million.
Based on the company’s current market cap, that would put the stock on a price to earnings (PE) ratio of 17-times earnings.
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That’s somewhat expensive compared to the company’s historical valuations. Plus, in the current market, where investors are still worried about consumer confidence, many see the stock as too expensive.
Add to that the lower Australian dollar, which makes foreign travel less attractive for Aussies, and investors have another reason not to buy.
Cheers,
Kris+
