Buy one, sell the other: Goldman's verdict on these 2 ASX 200 travel shares

The broker says one of these stocks could deliver 30% share price growth in just one year.

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Top broker Goldman Sachs reckons one of these ASX 200 travel shares could deliver 30% share price growth in just one year.

Let's review the broker's latest analysis on Australia's national carrier and ASX airline share Qantas Airways Limited (ASX: QAN) and global travel agency Flight Centre Travel Group Ltd (ASX: FLT).

Why ASX 200 travel share Qantas is a buy

Goldman has a buy rating on Qantas with a 12-month share price target of $8.05.

The ASX 200 airline share closed at $6.15 on Thursday, down 0.49% for the day.

So, Goldman's price target implies a potential 31% upside for investors who buy Qantas shares today.

The Qantas share price has lost 2.5% over the past 12 months.

The last piece of price-sensitive news out of Qantas was on 6 May, when the company announced a settlement with the Australian Competition and Consumer Commission (ACCC) over misleading conduct.

Qantas admitted it misled customers by advertising tickets for tens of thousands of flights it had already decided to cancel and cancelling other flights without informing ticketholders in a timely manner.

Qantas will pay a civil penalty of $100 million plus $20 million to more than 86,000 affected customers.

Goldman analysts Niraj Shah and Joseph Kusia say the ASX 200 travel stock is a key beneficiary of the post-pandemic travel recovery.

They expect the airline's traffic capacity to return to 95% of pre-COVID levels by FY24, with its earnings capacity to exceed pre-COVID levels by about 52%.

They also forecast an approximate 24% FY19-24e cumulative uplift in unit revenues (c. 4.4% pa) and about a 50% drop-through of the company's $1 billion structural cost-out program.

The analysts concluded the ASX 200 travel share was not appropriately priced by the market, commenting:

QAN's current market capitalisation and enterprise value are 10% below and 11% 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. 

Some hedge funds have recently targeted the ASX 200 travel stock, driving short-selling to multi-year highs.

Shah and Kusia outline some downside risks for Qantas:

Slower-than-expected traffic recovery; structurally reduced travel demand post-pandemic; irrational domestic market pricing; higher than expected fuel prices and unfavourable fx.

Why Flight Centre shares are a sell

Goldman has a sell rating on Flight Centre with a 12-month share price target of $18.30.

The ASX 200 travel share closed at $20.70 on Thursday, up 0.39% for the day.

So, Goldman's price forecast implies a potential 11.6% downside for investors who buy Flight Centre shares today.

The Flight Centre share price has lost 3.3% over the past 12 months.

The last price-sensitive news from Flight Centre came on 8 May. The company delivered a new investor presentation and trading update at the Macquarie Conference.

Goldman analysts Lisa Deng and James Leigh said:

FLT provided its trading update for 3Q24 and reiterated group underlying PBT guidance of A$300-340mn for FY24 (A$270 – A$310mn excluding Convertible Note amortisation).

While our calculation of implied 3Q24 numbers suggests that there is slightly below-expectations run-rate in Corporate, this will likely be offset by above-expectations run-rate in Leisure.

Net net, we continue to see recovery and competitive risks in Corporate per our downgrade in March 2024 and our thesis remains unchanged.

However, the analysts can see some upside risks for Flight Centre, including:

Higher Leisure revenue margin on business mix; 2) better-than-expected Corporate traveller and Corporate cost management; and 3) better-than-expected Corporate on market share gains.

Motley Fool contributor Bronwyn Allen 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 recommended Flight Centre Travel Group. 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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