Why Two ASX Travel Stocks Are Predicted to Surge 58% and 62%: A Smart Investment?

The Australian travel sector is showing significant signs of recovery, and two beaten-down ASX travel stocks are predicted to surge by as much as 58% and 62%. This has caught the attention of many investors who are looking for opportunities in a sector that was heavily impacted by the global pandemic. Could now be the perfect time to invest in these undervalued stocks? Let’s delve deeper into the reasons why these stocks are tipped for substantial growth and assess whether they’re a wise addition to your portfolio.

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Flight Centre Travel Group (ASX: FLT)

Overview

Flight Centre Travel Group (ASX: FLT) is one of Australia’s largest and most established travel agencies, with a vast global footprint. The company operates across a range of sectors, including leisure, corporate travel, and wholesale. With operations in more than 20 countries, FLT is a major player in the Australian and global travel industries. However, its dominant position in the market hasn’t shielded it from the struggles faced by the entire travel sector in recent years. The pandemic caused significant disruptions to its business, leading to a sharp decline in share prices as the company grappled with travel restrictions, border closures, and changing customer behaviour.

Why the Stock is Beaten Down

The major factor behind FLT’s current undervaluation stems from the lasting impact of the pandemic. As global travel came to a near halt, FLT’s business model, heavily reliant on international travel, was severely impacted. Although the company has seen a gradual recovery as travel restrictions have eased, there are still lingering concerns about its ability to regain pre-pandemic levels of performance, especially with fluctuating demand, rising costs, and supply chain disruptions affecting the broader travel industry. These challenges have caused analysts to hold a cautious view of FLT for an extended period, keeping its stock price suppressed.

Growth Potential

Despite these hurdles, FLT’s recovery trajectory is looking positive. Analysts predict a 58% surge in its stock price, largely due to the resurgence of travel demand as global restrictions ease. This recovery in travel is expected to fuel FLT’s growth, especially as international tourism rebounds, bringing a wave of customers looking to book vacations, corporate travel, and group tours. FLT’s focus on improving operational efficiencies and streamlining its services, particularly within the corporate travel sector, will also help boost profitability. Additionally, its expansion into higher-margin services, including luxury travel offerings, positions the company well for future growth.

Risks and Considerations

While FLT presents strong growth potential, it is not without its risks. Investors should be aware that the travel industry remains susceptible to global economic fluctuations, including rising fuel prices and potential geopolitical tensions that can disrupt international travel. Furthermore, FLT faces increasing competition from both traditional travel agencies and online platforms, which could squeeze its market share. The company’s dependency on international travel recovery means any setbacks, such as renewed travel restrictions or a slowdown in consumer confidence, could negatively affect its earnings.

Helloworld Travel Limited (ASX: HLO)

Helloworld Travel Limited (ASX: HLO) is another prominent player in the Australian travel market. The company operates under several well-known brands, including Helloworld, Qantas Holidays, and AOT Group. HLO primarily focuses on retail and wholesale travel services, offering a variety of travel options for both leisure and corporate clients. While HLO holds a strong position in the Australian market, the company’s stock has been underperforming for a variety of reasons, with its share price taking a significant hit during the pandemic. As a result, HLO has not yet reached the heights it once enjoyed, despite the recovery in global travel.

Why the Stock is Beaten Down

HLO’s stock price has remained suppressed due to multiple factors, including a slower-than-expected recovery in the travel industry, particularly within the international travel segment. The company’s reliance on global travel demand, combined with supply chain disruptions and rising operational costs, has led to weaker-than-expected financial results in recent quarters. Furthermore, HLO has faced challenges with its debt levels and cash flow management, adding to investor uncertainty. These factors have kept the stock undervalued, despite the gradual return of consumer confidence in the travel sector.

Growth Potential

Despite these struggles, HLO has strong growth potential, with analysts predicting a 62% surge in its stock price. This growth is expected to come from the recovery of both the leisure and corporate travel markets, particularly as business travel picks up and consumers return to booking holidays. HLO’s strategic focus on high-margin services, such as luxury travel, group tours, and specialised travel packages, should contribute to improving revenue streams. Moreover, the company’s operational restructuring and focus on strengthening its balance sheet will help position it for long-term success in a rebounding market.

Risks and Considerations

As with FLT, investors in HLO should be mindful of the risks inherent in the travel sector. The company’s performance remains tied to the pace of global travel recovery, and any changes in market conditions, such as a slowdown in consumer spending or a return of travel restrictions, could dampen growth prospects. Additionally, HLO faces intense competition from both established travel agencies and new, innovative online platforms, which could put pressure on margins and market share.

Market Context: The Australian Travel Sector

The Australian travel sector has been through a turbulent period due to the pandemic, but is now showing signs of robust recovery. As global travel restrictions ease, there has been a marked increase in domestic tourism, with Australians exploring more of their own country. International travel is also rebounding, with many countries lifting their entry restrictions and tourists returning to key destinations across Australia. These positive developments are driving optimism in the travel sector, as businesses in the industry begin to benefit from the pent-up demand for travel.

Why This is a Good Time for Travel Stocks

This moment in the market is an ideal time for investors to consider travel stocks. With the recovery of both domestic and international travel, the sector is positioned for significant growth. The travel industry’s rebound is driven by several factors, including government investments in tourism infrastructure, the lifting of global travel restrictions, and the increased demand for luxury and experiential travel. Analysts expect the sector to continue growing throughout 2025 and beyond, presenting a strong investment opportunity for those looking to capitalise on the recovery.

Investor Takeaway: Is Now the Time to Buy?

Key Insights

Both Flight Centre (FLT) and Helloworld Travel (HLO) show considerable growth potential, with FLT expected to surge by 58% and HLO by 62%. These predictions reflect analysts’ confidence in the recovery of the Australian travel sector and the companies’ ability to capitalise on the increasing demand for travel services. However, both stocks come with risks, particularly due to their reliance on international travel recovery and exposure to global economic factors.

Decision-Making for Investors

Investors should consider their risk tolerance and investment goals before buying into these stocks. FLT and HLO offer strong growth potential but also come with the inherent risks of market volatility and travel sector uncertainties. For investors seeking high-growth opportunities in a recovering market, both stocks could offer significant upside, but it’s important to be prepared for potential setbacks along the way. As always, diversification and a balanced investment strategy are key to mitigating risk.

Closing Thought

As with any investment, due diligence is essential. While both FLT and HLO show strong potential for growth, investors must stay informed about the changing dynamics of the global travel industry. By keeping a close eye on market conditions, travellers’ confidence, and industry shifts, these stocks could represent valuable opportunities for those looking to invest in the future of the Australian travel sector.

Conclusion

Flight Centre Travel Group (ASX: FLT) and Helloworld Travel Limited (ASX: HLO) both present compelling opportunities for investors looking to capitalise on the recovery of the Australian travel sector. With growth forecasts of 58% for FLT and 62% for HLO, these stocks are positioned to benefit from the resurgence in both leisure and corporate travel as borders reopen and demand returns.

However, as with any investment, it’s important to weigh the potential rewards against the risks. Both companies face challenges such as market volatility, competition, and reliance on international travel recovery. For investors with a higher risk appetite and a long-term perspective, these stocks offer a chance to tap into a sector poised for growth. As always, due diligence and a diversified investment approach are key to managing potential risks.

Now could be the time to invest in these beaten-down travel stocks, but staying informed on market developments and adjusting your strategy as needed will be crucial for success.

FAQs

• What is the forecasted growth for Flight Centre (ASX: FLT) and Helloworld Travel (ASX: HLO)?

  Analysts are predicting a 58% surge in Flight Centre’s stock price and a 62% surge for Helloworld Travel. These predictions are driven by the recovery in global travel demand and the companies’ strategic focus on high-margin services and operational improvements.

• Why are these travel stocks considered undervalued?

  Both Flight Centre and Helloworld Travel have faced significant challenges due to the pandemic, including travel restrictions and changes in consumer behaviour. As a result, their stock prices have been suppressed despite signs of recovery. The current undervaluation presents an opportunity for growth as travel demand rebounds.

• What are the main risks associated with investing in travel stocks like FLT and HLO?

  The main risks include dependence on global travel recovery, which can be affected by economic downturns, geopolitical tensions, or renewed health crises. Additionally, competition from online travel platforms and rising operational costs may impact margins and profitability.

• How long will it take for these stocks to recover?

  Recovery in the travel sector is expected to continue through 2025 and beyond, with analysts forecasting strong growth in both domestic and international travel. However, the timeline for individual stock recovery will depend on various factors, including the pace of global tourism recovery and the companies’ ability to manage operational challenges.

• Are these stocks suitable for conservative investors?

  These stocks may not be the best choice for conservative investors due to their exposure to market volatility and the cyclical nature of the travel industry. However, for investors with a higher risk tolerance and a long-term investment horizon, FLT and HLO offer strong growth potential.