Qantas Airways Limited (ASX: QAN) shares have been strong performers over the last 12 months.
As you can see on the chart below, since this time last year, the airline operator's shares have soared over 18%.
Image source: Getty Images
Have you missed the flight on Qantas shares?
With Qantas shares flying high and smashing the market, investors may be wondering if they are too late to the gate on this one.
The good news, though, is that one top broker doesn't believe it is too late. In fact, its analysts believe even greater returns await investors that commence boarding today.
According to its latest best ideas list, Morgans has an add rating on Qantas shares with a price target of $8.35. This implies potential upside of 29% for investors over the next 12 months.
Why is Morgans bullish?
Morgans is bullish on Qantas due to its positive outlook, lower costs, and attractive valuation. In respect to the latter, the broker highlights that the company's shares are trading at a significant discount to pre-COVID levels despite being a much stronger company now. It explains:
QAN is now our preferred pick of our travel stocks under coverage given it has the most near-term earnings momentum. Looking across travel companies globally, airlines are now in the sweet spot given demand is massively exceeding supply. QAN is trading at a material discount compared to pre-COVID multiples, despite having structurally higher earnings, a much stronger balance sheet, a better domestic market position, a higher returning International business and more diversification (stronger Loyalty/Freight earnings).
The strong pent-up demand to travel post-COVID should result in a healthy demand environment for some time, underpinning further EBITDA growth over FY24/25. QAN's balance sheet strength positions it extremely well for its upcoming EBITaccretive fleet reinvestment and further capital management initiatives (recently announced a A$500m on-market share buyback at its 1H23 result). There is also likely upside to our forecasts and consensus if QAN achieves its FY24 strategic targets.
