Yesterday’s session was a pleasing one for ASX shares and the S&P/ASX 200 Index (ASX: XJO). By the close of trading, the ASX 200 had recorded a healthy 0.85% rise to 7,402 points.
But that paled in comparison to the performance of the Flight Centre Travel Group Ltd (ASX: FLT) share price.
Flight Centre shares took off during Wednesday’s session. This ASX 200 travel stock closed at $22.66 a share, up a pleasing 1.21%. Earlier in the day, we also saw the Flight Centre share price climb to a new 52-week high of $22.80 a share.
Not only is that a new 52-week high for this travel company, but it is also the highest price point Flight Centre shares have traded at since October 2021.
The Flight Centre share price only needs another percentage point or two to hit a new post-COVID high as well, as you can see below:
So what’s going on here? Why did the Flight Centre share price just hit a new 52-week high?
Why did the Flight Centre share price just hit a new 52-week high?
Well, we can’t be absolutely certain. But what we do know is that investors have been flocking into this company’s shares ever since Flight Centre upgraded its FY2023 guidance last week.
As we covered at the time, this stock is now anticipating to bring in between $295 million and $305 million in underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) for the 12 months to June 30. That’s up substantially from the previous guidance range of $270 million and $290 million.
Since the company made this announcement on 20 July, the Flight Centre share price has climbed by almost 5%. So this probably played a major role in the new 52-week high we saw yesterday.
Short seller interest remains strong
But there’s something else that could be driving Flight Centre rates higher as well. As we’ve tracked extensively here at the Fool, Flight Centre remains one of the ASX 200’s most short-sold shares.
In fact, as my Fool colleague James revealed on Monday, Flight Centre was once again the most shorted share on the markets, with 10.2% of its outstanding shares held in a short position.
This means that one out of every ten Flight Centre shares has an owner that is betting the company will fall in value in the short-to-medium-term future.
However, when a share has a large short-seller following, it raises the chance that the company will be caught in a short squeeze. This happens when a company’s shares rise in value, and force the short sellers to close out their positions thanks to the increased risk of holding on.
When a shorter closes out of a position, they are forced to buy the shares back off the open market. If lots of shorters are doing this, it can force up the price of the company’s shares, creating a feedback loop.
This dynamic could well be in play at present, given the company’s positive update earlier this month.
So it’s likely that a combination of these factors was at play with the Flight Centre share price’s new 52-week high yesterday. Let’s see if this ASX 200 travel stock has another one up its sleeve in the coming weeks.
