Webjet Limited (ASX:WEB) Responds To Analyst Report

The Webjet Limited (ASX: WEB) share price was one of the hardest hit amid the sell-off on the ASX yesterday, closing the day 14% lower.

Aside from overall market weakness and coronavirus concerns, this fall was seemingly amplified by an investment analyst’s report which downgraded its price target for Webjet shares and highlighted web traffic concerns.

This morning, Webjet responded with a report of its own. Here’s what you need to know.

About Webjet Limited

Webjet is a digital travel business spanning both global consumer markets (‘B2C’) and wholesale markets (‘B2B’). It was established in 1998 and now claims to be the leading online travel agency (OTA) in Australia and New Zealand.

Webjet says it was the world’s first to use ‘Travel Services Aggregator’ technology and is now leading the industry in blockchain innovation. 

What’s Happened?

Webjet released an announcement this morning that sought to clarify what it considers to be inaccuracies included in the analyst report.

According to Webjet:

• The data stating that 65% of the traffic for Webjet’s online travel agency (OTA) division comes from search engines at a low cost is incorrect
• Regardless of source, traffic alone is not a proxy for Webjet OTA’s bookings or earnings growth, and has never been presented as such by the company
• Google’s intentions, as interpreted in the report, do not present a material threat to the current traffic or bookings volumes.

Webjet OTA’s Booking Sources

To provide further detail, Webjet went on to present a breakdown of OTA’s booking sources, which are as follows.

Direct Channels – 33%

Webjet considers direct channels to include typing webjet.com.au into a browser address bar, email marketing, and Webjet Apps.

For these bookings, customers have specifically chosen Webjet and as a result, the company does not believe direct channels are impacted by any proposed behaviour by Google mentioned in the analyst report.

Paid Brand Search – 27%

According to Webjet, this occurs when a customer types “Webjet” or a similar term in a search box and clicks on a paid advertisement that directs them to the Webjet website.

Once again, the customer is searching directly for Webjet, however instead of going to the Webjet website directly, they are using Google as a navigation tool to get there, by way of an ad.

Paid Non-Brand Search – 18%

Webjet’s distinction between paid brand search and paid non-brand search lies in the search term a customer types into their browser.

An example of paid non-brand search would be when a customer types a generic term into their browser such as “flights to bali” and then clicks on a paid advertisement for Webjet.

Organic Search – 22%

The remaining 22% of Webjet OTA’s bookings are split into two categories — Organic Brand (14%) and Organic Non-Brand (8%).

Organic Brand is where a customer types “Webjet” or a similar term into the search box and receives an organic result (i.e. not an advertisement) that directs them to the Webjet website.

Organic Non-Brand is where a customer types a generic search term into their search browser such as “flights to bali” and clicks on an organic Webjet result.

So, while the analyst report estimated 65% of Webjet’s traffic came from low-cost search engine results, Webjet sought to clarify that this figure was more like 8%.

“Webjet OTA captures 8% of its bookings from the Organic non-brand category, not the 65% that the report implies”, the announcement read.

“Unfortunately, the analysts research has relied on web-based tools which do not have access to first party data and therefore have questionable accuracy”, said Webjet.

What Now?

The Webjet share price has bounced back today with shares last trading 3.03% higher at $12.745.

The question of whether Webjet shares are cheap, expensive or somewhere in between lies primarily in valuation.

How do you value an investment? What does your process look like? Do you really understand what you’re investing in and why?