Will the Flight Centre Travel Group Ltd (ASX: FLT) share price be safe after the Australian Government update about the AstraZeneca vaccine?
What happened?
Yesterday evening, Australians learned that the official advice about the AstraZeneca COVID-19 vaccine, which is being manufactured in Australia by CSL Limited (ASX: CSL), had been changed.
Prime Minister Scott Morrison said that the vaccine would no longer be the recommended vaccine for Aussies under 50 because of rare blood clotting issues. According to the ABC, only one person, a 44-year-old Melbourne man, has developed clots so far after getting the jab.
If you’re under 50, then the recommendation is to get the Pfizer jab for younger Aussies.
Why does this matter for the Flight Centre share price?
Australia can’t simply access millions of doses of the Pfizer vaccine instantly. Vaccinations are in high demand across the world, so new orders will take a while to come through.
However, the over-50s can still get the AZ vaccine, as can under-50s, if they want to.
Flight Centre’s earnings are largely based on how much people travel. If the country could start letting Aussies travel overseas, and letting international visitors here, then it would lead to more earnings. But those dates now seem to have been pushed back again.
There is good news with the New Zealand travel bubble, which should lead to a good proportion of pre-pandemic volume coming back between the two countries. But there needs to be more than just one country link for Flight Centre’s profit to return.
The ASX travel share is doing well to limit costs and generate revenue where it can. But there is expectations of a recovery built into the Flight Centre share price which needs to happen.
Putting things into perspective
There are reasons why this may not be that big of a deal for Flight Centre. If it takes three months longer for Aussies to get vaccinated, then that’s not going to knock off a huge amount of earnings or the valuation. A business doesn’t get its total valuation from just three months, or even one year. It’s based on multiple years of expected earnings.
Flight Centre could be a longer term opportunity, but I’m not sure about the shorter term. COVID-19 impacts could last longer than some investors are expecting. However, all it would take is a good recovery of the domestic travel market and that would significantly help the Flight Centre profit.
At the moment there are other ASX growth shares I’m looking at more closely.
