Qantas Airways Limited (ASX: QAN) shares have been on a roll in recent weeks.
Since early March, the airline operator's shares have ascended by an impressive 24%.
This leaves them trading above the $6.00 mark for the first time this year.
Does this make its shares expensive? Or can they keep climbing? Let's see what analysts are saying.
Are Qantas shares too expensive?
The good news for investors is that you may not be too late to the Qantas party.
In fact, if one leading broker is on the money with its recommendation, there could be even larger gains to come for investors buying at today's price.
According to a recent note out of Goldman Sachs, its analysts have retained their buy rating and $8.05 price target on the airline operator's shares.
Based on the current Qantas share price of $6.21, this implies potential upside of 30% for investors over the next 12 months.
And while the broker is not expecting any dividends this year, they could be on the horizon. The broker is forecasting a 30 cents per share dividend in FY 2025. This represents a very attractive 4.8% dividend yield.
Why is it bullish?
Goldman believes the market is undervaluing the company based on its improved earnings capacity following the transformation of its business following the COVID crisis.
Despite these improvements, the company's valuation remains below pre-COVID times. It explains:
Qantas Airways is the flagship carrier of Australia and is the largest airline in Australia by capacity share, serving destinations domestically and internationally. As a key beneficiary of the re-opening of the world post-COVID, we expect the airline's traffic capacity to return to 95% of pre-COVID levels by FY24e, with the airline's earnings capacity (EPS) expected to exceed that of pre-COVID levels by ~52%. We forecast a ~24% FY19-24e cumulative uplift in unit revenues (c. 4.4%pa), and ~50% drop-through of QAN's A$1bn+ structural cost-out program. QAN's current market capitalisation and enterprise value are 10% below and 11% below pre-COVID levels.
Goldman then adds:
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.
Overall, this could make Qantas shares a good option if you're looking for exposure to the travel sector.
