The Qantas Airways Limited (ASX: QAN) share price was a very strong performer in October.
During the month, the airline operator's shares ascended an impressive 16.3%.
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Why did the Qantas share price take off in October?
The main driver of the Qantas share price gains in October was the release of a market update in the middle of the month.
That update revealed that the airline expects to generate a first half profit well ahead of the market's previous expectations.
Based on forward bookings, current fuel prices, and second quarter assumptions, Qantas advised that it expects to report an underlying profit before tax of between $1.2 billion and $1.3 billion for the first half of FY 2023.
Analysts at Citi were shocked by this guidance, given Qantas' previous outlook commentary. They commented:
A month and a half ago, QAN effectively guided to $1.3 billion PBT for the full year. Today however, expectations are to make that in a half. Given incremental extra costs, reductions in capacity and relatively soft passenger numbers, we assume yields were the driver of the circa 100%+ upgrade. While little detail was provided, we estimate 1H guidance implies yields circa ~40% higher than Pre-Covid.
Can its shares keep rising?
While Citi believes the Qantas share price has now peaked for the time being (neutral rating and $5.78 price target), others are more positive.
According to a note out of Morgan Stanley, in response to the update, the broker retained its overweight rating and lifted its price target to $9.00. Based on the current Qantas share price of $6.01, this implies potential upside of approximately 50% for investors over the next 12 months.
UBS is also positive and has a buy rating and $7.20 price target on its shares, implying potential upside of 20%.
All in all, it appears that many in the market believe Qantas' shares could build on October's gains in the months that follow.
