The Qantas Airways Limited (ASX: QAN) share price continues to be volatile. But is it a buy right now? Some brokers have had their say on the airline.
Over just the last two months, Qantas shares dropped almost 20% to $4.40 and from that low on 13 May 2021 it has risen by 10% to the price of $4.82 at the time of writing.
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What happened in the most recent update?
On 20 May 2021, Qantas gave a market update.
The airline said that a sustained domestic recovery is driving strong cash generation. Qantas said at the time it was expecting to be statutory free cash flow positive for the second half of FY21. Jetstar generated positive underlying earnings before interest and tax (EBIT) in April 2021.
Qantas is expecting to generate $400 million to $450 million of underlying earnings before interest, tax, depreciation and amortisation (EBITDA) in FY21. Qantas loyalty has returned to earnings growth in the second half of FY21.
Net debt peaked at $6.4 billion for the airline and is expected to be lower than December 2020 ($6.05 billion) by the end of the financial year.
The airline has also forecast a statutory loss before tax of more than $2 billion in FY21. This includes significant costs associated with redundancies, aircraft write downs and non-cash depreciation charges.
Qantas said that its recovery program is on track to deliver $600 million of ongoing cost reductions in FY21.
The company is seeing a domestic recovery which is driving the airline's improved financials. Domestic flying is expected to almost double between the first and second half of this financial year.
Domestic corporate travel, including the small business segment, continues to recover and is now at 75% of pre-COVID levels. This was a month on month improvement from where it was at 65% of pre-COVID levels in April.
Qantas said that leisure demand is growing strongly, with deferred international holidays converting into multiple domestic trips.
The airline said it's on track to reach 95% of its pre-COVID domestic capacity for the fourth quarter of FY21. Qantas and Jetstar expect to average 107% and 120% respectively of their pre-COVID domestic capacity in FY22.
Broker ratings on the Qantas share price
There isn't a consensus view on the airline.
The broker Citi thinks that Qantas shares are a buy, with a price target of $5.89. That suggests a potential upside over the next 12 months of more than 20%. Citi likes the strong market share that the airline has.
However, Credit Suisse has a sell rating on Qantas with a price target of $4.15. Whilst it acknowledges the benefits of the reduction of costs for Qantas, it pointed to the increase competition from Regional Express Holdings Ltd (ASX: REX) and the older Qantas planes as reasons why it had a lower price target for the Qantas share price. COVID-19 problems could also be an issue.
