Goldman Sachs tips Webjet share price to keep rising

The Webjet Limited (ASX: WEB) share price is trading lower on Friday morning.

At the time of writing, the online travel agent’s shares are down 1% to $6.12.

This appears to have been driven by profit taking after a very strong gain on Friday following the release of the company’s first half results.

Should you buy the Webjet share price dip?

According to a note out of Goldman Sachs, its analysts believe investors should be snapping up shares while they can.

This morning the broker retained its conviction buy rating on the company’s shares with an improved price target of $6.90.

Based on the current Webjet share price, this implies potential upside of almost 13% for investors over the next 12 months.

What did the broker say?

Goldman was very impressed with Webjet’s performance during the first half of FY 2023, noting that its result came in ahead of estimates. It commented:

WEB’s 1H23 results reported a strong beat across both the Webbeds and Webjet OTA business, cementing our view that the business is structurally improved vs. pre-pandemic times on profitability and scale in the Bedbanks business and is well poised to capitalize on the improving online channel penetration in their B2C business.

Our near term earnings changes remain modest given that we already price in a strong recovery for WEB in FY24/25. What these results have given us greater confidence is in the group’s longer term outlook for both the Bedbanks and OTA businesses. WEB also continues to report strong cash generation.

What about the Webjet dividend?

Despite reporting a profit and a hefty cash balance, Webjet decided against declaring an interim dividend for FY 2023.

Unfortunately, Goldman expects this to remain the case for a couple more years.

We delay our dividend recovery outlook to FY25 as we note the management’s conservative view on balance sheet position amidst ongoing macro uncertainties and priority being the redemption of the convertible notes when the put option becomes active in April 2024.

Nevertheless, with the Webjet share price offering ~13% upside, the broker continues to rate the company as a strong buy.