Why the Virgin Australia share price soared higher on Friday

One of the best performers on the All Ordinaries on Friday was the Virgin Australia Holdings Ltd (ASX: VAH) share price.

The airline operator’s shares finished the day almost 8.5% higher at 19.5 cents.

Why did the Virgin Australia share price take off?

With no news out of the airline or any broker notes that I’m aware of, I suspect that today’s gain is due to bargain hunters believing that its shares had bottomed.

Prior to today its shares were down 33% year to date and trading at a 52-week low of 18 cents.

Which is quite a contrast to the performance of the Qantas Airways Limited (ASX: QAN) share price which is up over 13% this year.

Will Virgin Australia continue its ascent?

From the broker notes that I have seen, I wouldn’t count on Virgin Australia’s shares continuing to ascend from here.

A note out of UBS at the end of October declared the airline as a sell with a 19 cents price target. And while fellow broker Goldman Sachs has a higher price target of 21 cents on its shares, it has retained its sell rating.

Instead, Goldman thinks investors should be buying the shares of arch rival Qantas. It has a sizeable $6.97 price target on the flag carrier airline, which implies potential upside of 22% over the next 12 months.

I agree with this view. With oil prices tumbling lower over the last couple of months, I believe Qantas is positioned perfectly to profit thanks to its strong operational performance and its fuel hedging policy.

All in all, I think Qantas is the best airline to invest in right now. But if you’re not keen on airline shares and still want to gain exposure to the tourism boom, you could consider Sydney Airport Holdings Pty Ltd (ASX: SYD). I think the airport operator is well-positioned to grow at a solid rate for the foreseeable future.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited. 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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