Qantas Airways Ltd (ASX: QAN) shares have delivered some sky-high returns over the past 12 months.
Down 0.1% in morning trade today, shares in the S&P/ASX 200 Index (ASX: XJO) airline stock have gained a whopping 41% since this time last year.
Qantas shares have been enjoying some strong tailwinds from pent-up travel demand as borders reopened post-pandemic. And with fewer planes in the sky, soaring ticket prices are expected to see the Flying Kangaroo post record-high profits for the 2023 financial year.
Management forecast underlying profit before tax of between $2.4 and $2.5 billion.
But could cost of living pressures put an end to the party?
Well, that depends on who you ask.
Consider trimming your exposure to Qantas shares
BW Equities' Tom Bleakley believes the airline is facing some turbulence ahead as consumers feel the cost of living pinch. He has a sell rating on Qantas shares.
He said investors may want to take a page out of Alan Joyce's book (courtesy of The Bull).
"Outgoing chief executive Alan Joyce sold 2.5 million Qantas shares at $6.7479 at the start of June, according to a filing with the ASX," Bleakley pointed out.
"Investors may also want to consider trimming their portfolios."
According to Bleakley:
Demand for travel has been strong since lockdowns were lifted. But we believe the tourism sector faces challenging times as consumers reduce their discretionary spending as a result of higher interest rates and soaring cost of living increases.
Demand outpacing supply
Making the bullish case for Qantas shares are the analysts at Morgans.
The broker named Qantas as its preferred travel stock pick its covering, "given it has the most near-term earnings momentum".
Morgans has a positive view about airline companies in general, noting, "Looking across travel companies globally, airlines are now in the sweet spot given demand is massively exceeding supply."
As for Qantas shares, the broker said:
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.
Morgans has an add rating with an $8.50 price target on Qantas shares.
That's almost 37% above the current $6.23 share price.
