The Qantas Airways Limited (ASX: QAN) share price has been an exceptionally strong performer over the last couple of months.
It was around this time in March that the airline operator's shares sank to a multi-year low of $2.03.
Since then Qantas' shares have rebounded remarkably strongly and are fetching $3.58 on Thursday afternoon. This means they are up more than 76% since hitting that March low.
Is it too late to invest?
Whether Qantas' shares are undervalued, fair value, or overvalued will depend largely on how quickly travel markets recover from the pandemic.
Based on current economic reopening expectations, I would say that the company's shares are closing in on fair value now.
However, if a vaccine is successfully developed and distributed in the coming month, then travel markets could rebound far quicker than expected. In this scenario, I would say Qantas' shares are very good value.
For this reason, I'll be watching the progress of Moderna's COVID-19 vaccine candidate, mRNA-1273 very closely. The early results have been promising, but there's still a bit of work and further testing to go before we'll know whether it is the key to unlocking global borders.
Morgan Stanley retains its overweight rating.
One broker that is bullish on Qantas is Morgan Stanley. This morning it retained its overweight rating on the company's shares with a slightly reduced price target of $5.20.
This price target implies potential upside of almost 45% over the next 12 months.
According to the note, the broker believes that Qantas' business will normalise in FY 2023. However, it suspects it could return to profitability a year earlier.
Though, it has warned that there is a lot of uncertainty, not least with rival Virgin Australia Holdings Limited (ASX: VAH) in voluntary administration. It feel that what happens with Virgin Australia could have a major impact in the coming years.
