Can the Qantas (ASX:QAN) share price fly higher in 2022?

Qantas shareholders are hoping for clearer skies ahead.

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A Qantas pilot stands in an empty passenger cabin smiling with his arms crossed feeling excited about international travel resuming

Image source: Getty Images

Key points

  • Qantas shares impacted by Omicron COVID-19 outbreak
  • Domestic and international passengers down from previous estimates
  • Clearer horizons expected to emerge in company’s half-year results in February

The Qantas Airways Limited (ASX: QAN) share price has failed to take off in 2022 and is down again today.

A surge in cases of the Omicron variant is causing widespread panic in Australia’s travel market. As a result, the Qantas share price has fallen over the past few weeks from $5.15 on 4 January to $4.86 today.

The Qantas share price is down by 3.57% in late afternoon trading on Friday. However, this is likely due to the broader market sell-off on the S&P/ASX 200 Index (ASX: XJO). The benchmark index is down 2.24% to 7,178 points.

What’s the latest with Qantas?

The volatility in the Qantas share price is being driven by uncertainty relating to the recovery of the travel market.

For the better part of 2021, Australia managed to control the spread of COVID-19. This led to Qantas taking advantage of the strong interest in consumers wanting to travel domestically.

However, investor confidence has turned sour following Omicron outbreaks across the country. This has caused Qantas to re-adjust its capacity estimates for the 2022 financial year.

As such, Qantas is forecasting third-quarter domestic capacity at 70% of pre-COVID levels. This is down from the 102% they had expected previously.

In addition, international capacity for the same period will fall from 30% to around 20% of pre-COVID levels. The reduction is being caused by increased travel restrictions in countries like Japan, Thailand and Indonesia.

On a positive note, other markets such as London, Los Angeles, Vancouver, Johannesburg and India are continuing to perform well for the ASX travel giant.

Qantas noted that an assessment of the financial impact of these changes will be given at its half-year results. By then, it expects a clearer picture of swing factors such as actual demand levels, and travel restrictions in overseas countries.

Will Qantas shares make a comeback in 2022?

It’s anyone’s guess whether the Qantas share price or any other ASX travel shares will return to their pre-COVID levels in 2022. However, a number of brokers believe that the Qantas share price is attractively valued today.

Last month, UBS slashed its outlook by 3.1% to $6.20 per share, representing a potential upside of 26%.

Following suit, Citi had a more bearish tone, cutting its price target on Qantas shares by 1.2% to $5.86 apiece.

Similar to UBS’s view, the team at JPMorgan also reduced its valuation by 0.8% to $6.25 this week. Nonetheless, the broker thinks there is still significant value in the airline and that a recovery is inevitable.

Qantas will report its FY22 half-year results on 24 February.

Qantas share price summary

Year to date, the Qantas share price has fallen by 5% amid Australia reporting record COVID-19 cases amongst its population.

Based on valuation grounds, Qantas has a market capitalisation of $9.16 billion, with approximately 1.88 billion shares on issue.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Aaron Teboneras owns Qantas Airways Limited. 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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