What’s this leading broker saying about the Qantas share price?

Qantas shares are flying in the green today.

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A woman holds her arms out as a plane flies overhead

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The Qantas Airways Ltd (ASX: QAN) share price has walked through today’s session in the green, currently 3.05% up on the day.

This continues a solid gain over the past week, where Qantas shares have climbed 13.6% higher in this time.

What’s behind the Qantas share price lately?

There have been several tailwinds behind the Qantas share price over the last week or so.

Despite reporting a $2.3 billion pre-tax loss in its FY21 results, investors seem confident that the company will recover strongly as the restrictions on domestic and international air travel are gradually lifted. The Qantas share price is up over 13% since reporting its FY21 earnings despite the mixed results.

Adding fuel to the engine, Qantas recently outlined a plan to potentially restart international flight routes from as early as December.

The company is confident the 80% vaccination target will be met in that month and is basing its decision on the target being reached.

Travellers could then fly to other low-risk COVID-19 countries, such as Singapore and the United Kingdom.

What are analysts saying?

One leading broker, JP Morgan, believes in the recovery of Qantas and is bullish on Qantas shares.

According to a note, the broker was happy with Australia’s vaccine uptake fuelling a recovery in the Qantas share price. It has reiterated its overweight rating on Qantas shares and increased its price target by 10 cents to $5.80.

This implies a potential upside of around 11% from the current market price of $5.24.

What else did the broker say?

Analysts at the investment bank believe Qantas is well-positioned to weather the storm caused by the pandemic. Speaking on what measures Qantas has taken, JP Morgan said the company had “taken material costs out of its business, around $1.1 billion of which are likely to be ongoing savings from FY23”.

It also added that it favoured Qantas’ “high proportion of earnings from domestic and loyalty at 70–75% of earnings, its strong relative balance sheet positioning and more favourable competitive position – both domestically and internationally”.

In light of this commentary, the broker has updated its modelling to reflect current market conditions. It now assumes “domestic capacity is at 77% in FY22 and back to above 2019 levels in FY23”. This forecast is also in line with Qantas’ guidance.

On the international side, the broker estimates that FY22 capacity will reach 25% of 2019 levels, and then rapidly increase to 70% by FY23. It believes international capacity will “approach pre-COVID-19 levels by FY24”.

Bringing it all together, JP Morgan believes this could be a buying opportunity for investors moving forwards.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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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