Doubts raised on Flight Centre stock
A DAY after Flight Centre shares hit a 15-month high on the back of improved profit guidance, analysts at Citi have cut the stock to a sell, saying growth opportunities for the travel group are limited.
Citi analyst Bryan Raymond said Flight Centre faces pressure from potentially weak growth in airfares and dwindling consumer demand, factors he said made the company’s current share price optimistic.
“The weak consumer is an emerging concern for Flight Centre’s volume growth,” Mr Raymond said in a report.
Mr Raymond said slow income growth and rising household bills could be impacting the ability of Australians to spend money on travel, particularly to far destinations like North America and Europe.
He said that could mean some consumers switching to travel within Australia or to cheaper overseas destinations such as Bali and Thailand.
The analyst put a target price of $40 on Flight Centre shares and cut his recommendation to a sell. Stock closed down 1.2 per cent at $43.57.
The shares had climbed more than 10 per cent on Wednesday, closing at $44.10, after the company announced it will likely hit a record $20 billion in sales for the just-completed financial year, helped by strong second-half performance.
Flight Centre expects underlying full-year profit before tax of between $325 million and $330 million, up from its previous forecast of $300 million to $330 million but still lower than the $352 million achieved in 2015-16.