Why the Qantas share price hit turbulence this week

The airline is still yet to find its way into blue skies as the barrage continues to rain down.

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The stomach-churning voyage embarked on by the Qantas Airways Limited (ASX: QAN) share price has continued this past week.

Jostling through the week like a Boeing 717 caught in wild weather, shares in the Australian airline bobbed up and down as investors reacted to more challenges arising for the company — adding to what has now been over a month of ridicule.

Facing the unrelenting headwinds of public perception, the Qantas share price has slipped 3.1% during the week. For context, the broad-based S&P/ASX 200 Index (ASX: XJO) trickled 1.7% lower in a tough stint for equities.

The gravitational force of negative news

It has been event after event for The Flying Kangaroo lately, and this week was no different.

On Wednesday, pilots in Western Australia flying for Qantas' Network Aviation went on strike after a breakdown in pay negotiations. The pilots, represented by the Australian Federation of Air Pilots, went on a 24-hour strike demanding better pay.

The industrial action resulted in around half of Qantas' regional flights getting canned on Wednesday.

Reportedly, Network Aviation employees had been offered increases of up to 25% and other benefits. However, Qantas said the union was seeking pay increases of over 50%, which the airline deemed "unreasonable".

On the same day, Qantas made it clear it did not want the federal government to reconsider its decision to block Qatar Airways from operating more flights in Australia.

In a nine-page submission, the airline refuted claims that Qatar's increased presence would bring hundreds of millions of dollars worth of tourism revenue into the country. Instead, Qantas highlighted that Qatar Airways is a net exporter of people from Australia.

Lastly, reports of an IT outage in the Qantas freight division boiled to the surface this week. Manual processing became the default after a new "fully integrated cloud-based" management system went haywire upon trying to switch it on.

Qantas freight customers have reportedly incurred hundreds of thousands in costs amid the mishap. Among the costly spoils were fresh produce and pharmaceuticals, caught up in processing for up to a week.

While the system was said to be fixed on Tuesday, international deliveries are still facing delays.

Is the Qantas share price a buy?

After reporting a mega-profit in August, the Aussie airline is now trading on a trailing price-to-earnings (P/E) ratio of 5.5 times earnings. Whereas the global airline industry average earnings multiple currently hovers around 10 times.

Could it be a contrarian opportunity? Based on multiple price targets among brokers… possibly.

Both Goldman Sachs and Jefferies are targeting prices well in excess of the current $5.04 Qantas share price. Specifically, Goldman believes the troubled airline could reach $8.25 over the next year, while Jefferies is eyeing $7.79 — more than 50% above today's price.

Furthermore, Australian fund manager Pendal still held Qantas shares in high regard at the end of August. The monthly fact sheet for the Pendal Focus Australian Share Fund counted Qantas as a top 10 holding with a 4.4% weighting.

The Qantas share price is down 15.2% so far in 2023.

Motley Fool contributor Mitchell Lawler 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 and Jefferies Financial 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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