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Is the Qantas (ASX:QAN) share price great value?

qantas share price
Image Source: Qantas

The Qantas Airways Limited (ASX: QAN) share price is trading lower with the market on Friday.

In afternoon trade, the airline operator’s shares are down 2% to $4.99.

Is the weakness in the Qantas share price a buying opportunity?

According to analysts at Goldman Sachs, investors should consider today’s weakness in the Qantas share price as a buying opportunity.

A note out of the investment bank this morning reveals that its analysts have retained their buy rating but trimmed their price target to $6.38. This follows the release of its half year results on Thursday.

Based on the current Qantas share price, this price target implies potential upside of almost 28% for its shares over the next 12 months.

What did Goldman Sachs say?

While Goldman Sachs acknowledges that COVID-19 disruptions are not necessarily over, it is becoming increasingly positive due to vaccine rollouts.

In fact, the broker believes Qantas is one of the best placed companies under its coverage to benefit materially from the rollout. It explained:

“We reiterate our Buy rating on Qantas (QAN.AX) with our revised 12-month Target Price of A$6.38 presenting 25% upside from current levels. QAN has been significantly disrupted by the repeated closure of domestic borders over the past 12 months in reaction to localised outbreaks across all states. With the increasing prevalence of newer more infectious strains of the COVID-19 virus, we can’t rule out an ongoing dynamic of unpredictable and reactionary border closures. With c.80% of pre-covid (FY19) earnings coming from its domestic-oriented and loyalty businesses, QAN has and continues to be materially operationally and financially affected by this dynamic, and as such is one of the best placed stocks in our coverage to benefit materially from the Australian COVID-19 Vaccination program as it rolls out across the country this week.”

Goldman Sachs also notes that the company is aiming to increase domestic capacity to 80% of pre-COVID levels in the fourth quarter of FY 2021. Its analysts feel this is possible due to what they have seen over in New Zealand.

“QAN continues to prepare its business for a broad based re-start of domestic activity, and has planned to increase domestic capacity in 3Q21 to 60%, and 4Q21 to 80% of pre-covid levels, suggesting a very rapid recovery in overall domestic volumes for QAN on a re-opening. On today’s analyst call QAN highlighted that it was gaining share from rivals at both the premium and discount ends of the market, and that this had underpinned the strong demand they were witnessing leading into the April holiday period. Qantas Domestic is expecting demand at 80% of pre-covid levels and Jetstar expecting closer to 100% of pre-covid levels. These rates of market recovery are consistent with those seen in NZ following its lockdowns in CY20.”

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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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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