Whilst almost every company across the country will feel some impact from the pandemic, few will be hit as hard as Qantas and fellow airline operators such as Air New Zealand Limited (ASX: AIZ) and Virgin Australia Holdings Ltd (ASX: VAH).
This has unsurprisingly led to a sharp decline in the Qantas share price over the last six weeks. The question on the lips of many investors right now is: is it time to buy Qantas shares?
Is the Qantas share price in the buy zone?
Last week Qantas revealed that it successfully secured a total of $1.05 billion of additional liquidity to secure the long-term viability of the airline and strengthen its position to navigate the fallout from the coronavirus crisis.
I think this was a great move by the company and should provide it with enough liquidity to last it until at least the end of the year.
This essentially means that if the coronavirus crisis passes and travel and tourism markets return to relative normal before then, Qantas should be positioned to ride out the storm. It may also come out in a stronger position if other airlines are not as fortunate.
In light of this, I believe Qantas could prove to be a bargain buy at the current level if the pandemic passes in the coming months.
But of course, predicting the end of the pandemic is close to impossible. So, if you do invest, I would restrict an investment to just a small part of your portfolio given the risks involved.
What do brokers think?
Australia’s leading brokers are largely divided on the company’s prospects.
One broker that is bullish is Morgan Stanley. Last week it retained its buy rating and $5.60 price target on the company’s shares. This price target implies potential upside of ~70% over the next 12 months.
Conversely, analysts at Credit Suisse are bearish on the airline operator. Earlier this week the broker downgraded its shares to an underperform rating with a $2.20 price target.
This price target represents potential downside of ~33% over the next 12 months. The broker believes that it could be as far out as FY 2023 before there is a full recovery in the travel sector.
Whatever happens, it will no doubt be a bumpy ride over the coming months for Australia’s flag carrier airline. But I’m optimistic the long-term trajectory for its share price will be upwards.
As well as Qantas, here are five top stocks which have fallen hard and have been tipped to bounce back very strongly.
5 “Bounce Back” Stocks To Tame The Bear Market (FREE REPORT)
Master investor Scott Phillips has sifted through the wreckage and identified the 5 stocks he thinks could bounce back the hardest once the coronavirus is contained.
Given how far some of them have fallen, the upside potential could be enormous.
The report is called 5 Stocks For Building Wealth after 50, and you can grab a copy for FREE for a limited time only.
But you will have to hurry — history has shown the market could bounce significantly higher before the virus is contained, meaning the cheap prices on offer today might not last for long.
Motley Fool contributor James Mickleboro 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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