Own Qantas (ASX:QAN) shares? Morgan Stanley sees ‘significant upside’ to earnings

The broker retains its bullish stance on the Flying Kangaroo despite recent challenges due to Omicron.

| More on:
A couple carrying suitcases arm in arm at the airport.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key Points

  • Investors overlooking ASX travel shares due to Omicron variant impact
  • Morgan Stanley bullish on Qantas, saying its robust balance sheet will withstand challenges
  • The consensus price target on Qantas is $6.02

Shares in airline operator Qantas Airways Limited (ASX: QAN) inched higher to close at $5 today, up 0.2% at the closing bell.

With international travel yet to normalise, investors are overlooking ASX travel shares like Qantas, especially given renewed economic pressure from the Omicron COVID-19 variant.

As such, the Qantas share price has struggled lately and is down considerably over the past 3 months. It has, however, held stable gains over the past year.

What’s the outlook for Qantas shares?

Despite the short-term noise, broker Morgan Stanley is bullish on the travel stock. It reckons Qantas investors could be in for a positive surprise come next earnings season.

Analysts at the firm note that Qantas’ third quarter tightening of capacity illustrates just how difficult it can be to manage an airline during this pandemic.

However, Morgan Stanley reckons investors should overlook the short-term noise. The broker is confident that “the balance sheet will withstand near-term challenges” and consequently sees “significant upside to earnings under ‘normal’ conditions”.

Morgan Stanley rates the airline a buy and values the company at $7 per share as of yesterday.

Meanwhile, the team at JP Morgan also rates Qantas a buy. They’ve assigned Qantas a $6.30 share price target. The firm remains comfortable on the “prognosis for a domestic aviation recovery” and sees capacity guidance of approximately 109% over 2H FY22 as achievable.

UBS also reckons that any potential threats are already priced into the Qantas share price at its current valuation. In an update last month, the Swiss broker valued Qantas at $6.20 per share and recommended that its clients buy in.

Based on a list of analysts covering Qantas provided by Bloomberg Intelligence, 84.6% rate it as a buy, with a consensus price target of $6.02.

Qantas share price snapshot

The Qantas share price is up 2.46% over the past 12 months to $5 today. Prior to the pandemic crash in February 2020, it was trading at $6.50.

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.

More on Travel Shares

A mum lifts her daughter high into the air so she can fly.
Travel Shares

Here’s why I think the Webjet share price could fly higher in 2022

There are plenty of reasons why I think this ASX travel share is a good opportunity.

Read more »

a small boy sits alone with his brightly coloured suitcase next to him in a deserted airport while he rests a hand against his head and looks down into his lap as though he is weary.
Travel Shares

Why did the Flight Centre share price tumble 15% in June?

The ASX 200 travel giant struggled last month. We take a closer look.

Read more »

Woman sitting looking miserable at airport
Travel Shares

Why did the Qantas share price plunge 19% in June?

With July upon us, we look at the headwinds that battered the flying kangaroo in June and a few offsetting…

Read more »

Paper aeroplane going down on a chart, symbolising a falling share price.
Travel Shares

What is holding back the Flight Centre share price today?

Flight Centre shares are slumping today...

Read more »

a young girl wearing a set of airplane wings stands on a tarmac with hands in the air and an excited look on her face as though she is about to take off.
Travel Shares

Why this smaller ASX travel share is locking horns with Qantas over regulation

Here's the latest on Regional Express' battle with Qantas over regional flight routes.

Read more »

An airport ground staff worker holds two red beacons in either hand crossed above his head on a vast airport tarmac.
Travel Shares

Own Qantas shares? Here’s why the $5K staff bonus could be up in the air

Qantas sounds alarm bell on $5K bonus to employees

Read more »

A woman on holiday stands with her arms outstretched joyously in an aeroplane cabin.
Travel Shares

Qantas share price climbs as first direct flight to Europe touches down in Rome

Qantas shares are taking off today.

Read more »

A smiling boy holds a toy plane aloft while an unhappy girl watches on from a car near an airport runway.
Travel Shares

2 ASX travel shares buy-rated by experts that could take off

Travel is booming. These two picks by experts could take advantage of that.

Read more »