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Why this investment bank thinks Qantas Airways Limited (ASX:QAN) is a buy

Global investment bank Bank of America Merril Lynch (BAML) has reinstated coverage of Qantas Airways Limited (ASX: QAN) to issue a buy rating, according to an article in The Australian.

According to the report, rising airfares and the prospect of capital returns to shareholders has prompted BAML to place a $7.75 price target on Qantas shares despite the looming threat of higher oil prices.

Qantas shares have seen some volatility in the last 12 months, up 0.9% to $6.43 at the time of writing, but the last year of pricing has undoubtedly been more favourable than the likes of five years ago, when Qantas shares dropped down to $1.00 on December 13, 2013.

Citi labelled Qantas as a buy late last month slapping a $7.90 price target on the stock due to its confidence in the company’s international prowess.

But aside from oil price headwinds, Qantas will always face competitor price war pressures, as players like Webjet Limited (ASX: WEB) and Flight Centre Travel Group Ltd (ASX: FLT) push to transform the industry and play off its counterparts for the betterment of customers.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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