Qantas Airways Ltd (ASX: QAN) shares have had a rough run since the end of February.
On Friday, shares in the S&P/ASX 200 Index (ASX: XJO) airline stock closed the day at $8.90 each.
That sees the Qantas share price down 16.43% since the 25 February close of $10.65 a share.
For some context, the ASX 200 is down 4.21% over this same period.
Now, I should mention that Qantas traded ex-dividend on 10 March. Eligible stockholders will have received that fully-franked 19.8 cents a share dividend on 15 April. Which puts the accumulated value of the stock down a lesser 14.57% since February.
We'll look at why a leading fund manager believes Qantas stock could come flying back in a tick.
But first…
Image source: Getty Images
What's been pressuring the ASX 200 airline stock?
Qantas shares closed down 9.2% on 26 February, despite reporting some strong half-year results on the day.
Highlights for the six months included a 6% year-on-year increase in revenue to $12.9 billion. And on the bottom line, Qantas reported underlying profit before tax of $1.46 billion, up $71 million.
It's unclear if the selling was spurred by investor concerns over reduced travel demand amid rising inflation and interest rates, or whether some investors may have seen the writing on the wall in terms of the US and Israeli strikes on Iran over the following weekend.
But the onset of the Iran war on 28 February has certainly thrown up headwinds for Qantas and other global airlines.
Atop from potentially decreasing international travel demand, the Middle East conflict has sent oil prices soaring.
On 27 February, Brent crude oil was trading for US$72 per barrel. The oil price then went on to top US$118 per barrel on 29 April. On Friday, Brent crude oil was fetching US$102 per barrel, up almost 30% since the start of the war.
Now, that's a big deal for Qantas shares.
Why?
Well, on 26 February, Qantas forecast that its second half-year (H2 FY 2026) jet fuel costs would come in at around $2.5 billion.
But in a market update on 14 April, Qantas revealed that it now expects second half-year jet fuel costs to be in the range of $3.1 billion to $3.3 billion.
Which certainly puts my own fuel bills into perspective!
Why Qantas shares could be poised for take off
Asked which stock his fund holds that's most undervalued by the market, Mans Carlsson, co-portfolio manager at Ausbil, recommended that investors consider Qantas (courtesy of The Australian Financial Review).
And much of his bullishness stems from the impact of the recent oil price spike.
"The market has priced an assumption that oil prices remain elevated, and we believe that investors need to look through the current geopolitical crisis," Carlsson said.
"At present, Qantas is trading at an FY28 price-earnings ratio of approximately seven times, which is extremely low versus the market average," he added.
Summarising his bullish view on Qantas shares, Carlsson concluded, "We think that as we move beyond the oil supply shock, Qantas could be set for a significant re-rate on improving operating conditions."
