The Qantas Airways Limited (ASX: QAN) share price could be gearing up to take off over the next 12 months. One top broker has tipped the ASX travel stock to surge a whopping 42.4% to trade at $6.55.
The Qantas share price closed Thursday's session at $4.60.
So, what does the expert believe will drive the national airline's stock sky-high over the coming year? Let's take a look.
Qantas share price to reach $6.55: UBS
The airline's investors may have been disappointed by its 11% year-to-date tumble, but they could be about to experience a major turnaround.
Broker UBS has tipped a 42% upside for the Qantas share price. It believes the airline's earnings per share (EPS) has built more resilience against market downturns than it previously had but notes the stock would likely underperform if Australia falls into recession, reports The Australian.
"Given the pent-up demand, combined with low unemployment, accumulated household savings, and mortgages on fixed rates, it may take longer than usual for activity to slow down in response to monetary policy," UBS analysts said, courtesy of the publication.
"This gives Qantas more time to plan capacity, schedules, staffing, and marketing for such conditions."
As such, it may not fall back on previous tactics of growing capacity while reducing fares – a strategy UBS dubbed "devastating to profitability".
However, analysts reportedly noted a downturn in the near future could see the airline reducing capacity to reserve fuel while keeping yields higher. That would better support profits but could shrink Qantas' market share.
Qantas expects to have ended financial year 2022 with $4 billion in debt – well below pre-pandemic levels and notably lower than its mid-pandemic-peak of $6.4 billion.
The airline also expects to report between $450 million and $550 million of earnings before interest, tax, depreciation, and amortisation (EBITDA) for the second half and to post a full-year profit for financial year 2023.
UBS tips the airline to post earnings before interest and tax (EBIT) loss of $1.4 billion for this financial year. Though, it expects Qantas to report $1 billion of EBIT and a return to dividends, with a 3 cent pay-out, in financial year 2023, reports the Australian Financial Review.
