Qantas Airways Limited (ASX: QAN) shares have been having an incredibly turbulent time of late.
So much so, the airline operator's shares are now flying closer to their 52-week low than their 52-week high.
One leading broker that believes this could be an excellent buying opportunity for investors is Goldman Sachs.
What is Goldman saying about Qantas shares?
The broker highlights that Qantas has just released a market update outlining an increased investment in customer experience and expectations for higher fuel costs.
While this is disappointing, it was pleased to see that "overall demand levels remain strong with 1Q24 trading conditions consistent with 4Q23 levels." Another positive is that it believes 70% of its higher fuel expenses will be recovered through higher revenue per available seat kilometre/ticket prices.
Overall, this has led to the broker only cutting its earnings per share estimate for FY 2024 by 12% to 95 cents.
'Valuation remains attractive'
Goldman believes the company's "valuation remains attractive" at current levels and has a conviction buy rating and a trimmed price target of $8.25. This implies a potential upside of approximately 58% for Qantas shares over the next 12 months.
And while the broker isn't expecting any dividends this financial year, it is worth noting that it is forecasting a very attractive 5.7% dividend yield for both FY 2025 and FY 2026.
In light of the above, Goldman continues to believe that the market is undervaluing the company's improved earnings capacity. It concludes:
QAN's current market capitalisation and enterprise value are 17% below and 24% below pre-COVID levels. As such, we believe QAN is not priced for a generic recovery, let alone prospects for improved earnings capacity. We continue to see upside associated with substantially improved MT earnings capacity and include QAN in our regional Conviction List.
