Qantas shares have surged nearly 70% over the past 12 months.
Over the past 5 years, the stock has risen an impressive 170%. For the year to date, Qantas shares are up 13%.
Any way you look at it, Qantas Airways Ltd (ASX: QAN) investors have done very well for themselves over both the short and long term.
Can they keep rising?
As many ASX investors have learnt the hard way, past performance doesn't guarantee future performance.
Let's take a look at what leading broker JP Morgan (NYSE: JPM) thinks Qantas shares are worth, and whether there's any further upside from here.
On February 27, JP Morgan revised its price target for Qantas shares after reviewing the ASX 200 travel stock's half-year result.
The broker upgraded its price target from $8.50 to $9.39.
In that research note, JP Morgan said:
Our investment view on the stock is bolstered by today's result – with the company reiterating a robust outlook for travel demand, with strong leisure travel (reflected in Jetstar's earnings) as well as improving trends in corporate/SME travel.
Notably, Jet Star earnings were up 35% year-over-year. This was higher than consensus estimates.
The broker also described the outlook for RASK as positive, with growth expected in domestic unit revenue as international yields are expected to stabilise. For reference, Revenue per Available Seat Kilometer (RASK) is a key performance indicator (KPI) used in the airline industry to measure revenue generation efficiency.
At the time of JP Morgan's research note, Qantas shares were changing hands for $9.39. JP Morgan placed an 'outperform' rating on the stock and described the business as 'well positioned'.
The following four factors were cited when issuing this rating:
1) [Qantas] has taken material costs out of its business; 2) its high proportion of earnings from domestic and loyalty at ~70-75% of earnings; 3) its strong relative balance sheet positioning; and 4) its more favourable competitive position – both domestically and internationally.
What has happened since then?
While JP Morgan has not revised its price target since February, there have been key business developments.
In June, Qantas announced the imminent closure of its Jetstar Asia (JSA) business.
As The Motley Fool's James Mickleboro reported, fellow broker Macquarie Group Ltd (ASX: MQG) supported the move, believing it would boost the company's earnings in FY27.
In an 11 June research note, Macquarie reaffirmed its neutral rating on the company's shares with an improved price target of $10.10.
The broker also forecasted fully franked dividend yields of approximately 5% for the next three years. This may appeal to those seeking passive income.
However, with Qantas shares closing last Friday at $10.27, this suggests that both JP Morgan and Macquarie believe Qantas shares are fully valued.
Those looking to initiate a position in Qantas shares should wait for a more attractive valuation.
