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Are Qantas shares in the buy zone yet?

The pain is continuing for Qantas Airways Limited (ASX: QAN) shares. Despite its status as Australia’s national carrier, Qantas is in lockdown.

According to a statement released to the ASX this morning, the airline is standing down two-thirds of its 30,000-strong workforce until at least the end of May 2020.

This comes on top of the carrier announcing the suspension of all regularly scheduled international flights from late March until at least the end of May, as well as the deferral of its interim dividend payment.

Staff at Qantas will be asked to use long-service leave and annual leave as part of the arrangements, as well as measures such as half-pay leave and ‘early access’ to long-service leave. However, CEO Alan Joyce admitted that “periods of leave without pay for some employees are inevitable.”

“The reality is we’ll have 150 aircraft on the ground, and sadly there’s no work for most of our people,” Mr Joyce stated in the release. “No airline in the world is immune to this, with the world’s leading carriers making deep cuts to flying schedules and jobs. Our strong balance sheet means we’ve entered this crisis in better shape than most,” he added.

Are Qantas shares in the buy zone?

The Qantas share price is currently at lows not seen since 2014 when the company was asking the Federal Government for a bailout. Today, Qantas shares are trading for $2.28 at the time of writing – a far cry from the $7.20 the company was asking back in January. That’s close to a 70% turnaround.

Despite this collapse, I do think there’s too much uncertainty here for a buy into Qantas shares today. No one has any idea how long this new paradigm will last and as Mr Joyce has said: “the efforts to contain the spread of Coronavirus have led to a huge drop in travel demand, the likes of which we have never seen before”.

It’s impossible to know when this drop will reverse (it could take months or even years). Thus, I don’t find shares in this business appealing, no matter how low they get.

However, it is worth saying that (in my opinion) it’s unlikely the government would allow Qantas to collapse. The government has already offered the airline a $715 million relief package consisting of tax deferrals, refunds and waivers of fuel excise and other charges. It’s still a ‘no deal’ for me though.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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