Qantas Airways Ltd (ASX: QAN) shares are flying higher today.
Shares in the S&P/ASX 200 Index (ASX: XJO) airline stock closed yesterday trading for $10.50. In morning trade on Thursday, shares are changing hands for $10.99 apiece, up 4.7%.
For some context, the ASX 200 is up 0.1% at this same time.
Today's outperformance is par for the course for Qantas shares over the last year. The stock has gained a whopping 79.0% over the past 12 months, racing ahead of the 11.5% one-year gains posted by the ASX 200.
And with those kinds of outsized gains in the bag, Morgans' Damien Nguyen said shareholders may want to take some profits off the table (courtesy of The Bull).
Time to sell Qantas shares?
Nguyen noted that Qantas shares have "rebounded strongly since the pandemic, but several factors suggest it might be time for investors to consider selling stock".
He cited three headwinds that could pressure the Flying Kangaroo in the year ahead.
"The airline faces challenges, such as increasing competition, volatile fuel costs and potentially softer international travel demand," Nguyen cautioned, who has a sell recommendation on the ASX 200 airline.
On the competition front, Virgin Australia could steal back some domestic travel share, bolstered by its partnership with Qatar Airways and Virgin's return to the ASX via its recently announced $685 million initial public offering (IPO).
And while it hasn't negatively impacted Qantas shares today, we're certainly seeing the volatile fuel costs that Nguyen mentioned in play.
With tensions heating up between the United States and Iran over Iran's nuclear ambitions, the oil price surged almost 5% in 24 hours. Brent crude oil is currently trading for US$69.88 per barrel, up from US$65.34 last week.
To give you some idea of just how large an expense jet fuel is for airlines, Qantas estimates its full year FY 2025 jet fuel costs will come out to around $5.22 billion.
As for the third potential headwind Nguyen mentioned that could drag on the airline, rising global geopolitical uncertainty may well take a bite out of international travel demand. Both for business and pleasure. A potential global economic slowdown wouldn't help international travel demand either.
Citing other potential hurdles for ongoing growth in the Qantas share price, Nguyen said, "Market sentiment is shifting and strategic moves, such as past share buybacks, could influence liquidity and long-term growth potential."
Nguyen concluded, "While Qantas remains a leader in the aviation industry, investors may find better opportunities elsewhere if current valuations don't align with future earnings potential."
