- Flight Centre posted its second best results but shares are down -7%
- The company has missed analyst expectations despite the good result
- The company is backed by 13 brokers but is the most 9th shorted stock on the market
- Flight Centre says demand is booming even as household savings decline
- The company also stands heavily
Flight Centre’s (ASX:FLT) half year report is out and the company has posted revenues 28.5 per cent higher vs pcp at $1.287B.
But underlying profit post-tax was the real show, reflecting a jump of 739.9 per cent to $74.38M.
Flight Centre said this is its second best year on record and that 2024 could even be a “watershed” for the travel sector.
And yet, at 1.40pm AEDT on Wednesday, shares were down -7.09 per cent to $20.19/sh.
The tyranny of analyst expectations is what we’re seeing play out today, with the stock missing expectations.
But the drop is noticeably steep for a company with a fairly good result, given the current climate.
So despite analyst recommendations this could seems fairly counterintuitive for a company returning to profit, providing a yearly return of 7.39 per cent, and a stock which enjoys a ‘Buy’ rating from no less than 13 different brokers.
At least, it seems counterintuitive to me.
But the chart doesn’t lie – the market isn’t particularly bullish on Flight Centre’s upbeat tone on Wednesday.
Ninth most shorted stock on ASX
In analysing why the share price is down, it’s probably worth highlighting Flight Centre sits in an interesting position on the ASX.
While 13 brokers rate the stock a ‘Buy’ – the company is also the 9th most shorted stock on the ASX, as at 1pm on Wednesday 28 February 2024.
The stock has been hit with a 8.35 per cent short, which could indeed be exacerbating the pace of losses on the stock today.
These losses come even as the stock exits COVID not really too worse off for wear.
And management says that the market for travel right now is booming, against all odds in a country where the household deposit ratio has declined to a historic low.
Just check out the chart below.
So for as long as Flight Centre can benefit from the forever-recession-that-never-was, it looks like the stock could remain locked between the expectations of bullish analysts and the skepticism of hedge funds.
There’s also the fact that the stock remains exposed to high levels of competition.
“Who even uses Flight Centre anymore? Just download an app,” a colleague of mine at The Market Online pointed out.
He’s right: I haven’t gone to an agent to book a holiday since I was a teenager, and that was my family doing it for me.
Which could remain the demographic most in-place.
FLT only used the word “demographic” once in its HY report.
“Patterns of travel behaviour [have normalised] differently across demographics leading to vastly differing consumer preferences,” the company mentioned, buried on page 8 in the DIrectors’ Report.
Shares last at $20.19.