Brokers tip 40%+ upside for Qantas share price

The Flying Kangaroo's shares could have huge upside according to analysts.

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The Qantas Airways Limited (ASX: QAN) share price had a poor start to the week.

The airline operator's shares ended the day 2% lower at $6.12.

While this is disappointing, it could prove to be a great buying opportunity for investors.

That's because a couple of leading brokers are tipping a major upside ahead for the Flying Kangaroo's shares.

What is being said about the Qantas share price?

According to a note out of Goldman Sachs, its analysts have responded to the company's FY 2023 results by retaining their conviction buy rating with an improved price target of $8.75.

Based on the current Qantas share price, this implies a potential upside of 43% for investors.

Goldman continues to believe that the market is undervaluing the company based on its improved earnings capacity. It said:

Notwithstanding a decline in unit revenues (and group capacity still at 95% of pre-COVID) our estimated FY24e EPS sits 89% above pre-COVID levels. Despite this, QAN's market capitalisation and EV is 1% and 13% lower than pre-COVID levels. We acknowledge broader macro uncertainty at this point in the cycle, but believe the current share price does not reflect the group's improved earnings capacity.

'Risk remains to the upside'

Over at Morgans, its analysts are feeling almost as bullish. They have an add rating and $8.60 price target on the company's shares, which implies a potential upside of 40% over the next 12 months.

Its analysts also believe that the company's shares are dirt cheap at current levels. They commented:

Qantas Airways' FY23 result was a record and all in line with recent guidance provided at its May trading update. The company continues to show confidence in its outlook and balance sheet (despite record upcoming capex spend) with it announcing another A$500m on-market share buyback (above MorgansF of A$400m).

From here, 1H24 guidance likely provided in Oct/Nov will be the key share price catalyst. With QAN trading on its lowest P/E multiple in years (FY24F of 5.4x post buybacks), risk remains materially skewed to the upside. ADD maintained.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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 Scott Phillips.

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