Could the Qantas Airways Limited (ASX: QAN) share price soon return to pre-COVID levels? Analysts at UBS reportedly think so.
They're said to have tipped Qantas' stock to lift to its highest point since late 2019 as the airline's cost-saving and growth activities start to take effect.
At the time of writing, the Qantas share price is trading at $5.43, down 1.8%.
Let's take a look at what's got the top broker excited about Qantas.
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Qantas' earnings tipped to reach pre-COVID levels by FY24
The Qantas share price has lifted around 135% from its lowest point of the pandemic and, according to UBS, it could have another 22% left in it.
The broker believes Qantas' earnings could recover to pre-COVID levels by financial year 2024 and its stock will follow suit, reports The Australian.
UBS equity analyst Andre Fromyhr was quoted by the publication as telling clients:
Buying into Qantas' growth initiatives post-recovery is a different proposition to investing in [Qantas] for the recovery itself – however we think there's enough valuation support without assuming much from such initiatives.
The [free cash flow] outlook is also positive but less clear, partly due to use of latent COVID credits, but also because Qantas is already investing in growth.
Qantas has reinstated its capital expenditure guidance for financial year 2023. The airline predicts it will come in at between $2.3 billion and $2.4 billion.
The airline is also working on 'Project Sunrise' which should see it launching 12 new Airbus A350s from financial year 2025.
Finally, Qantas has placed a $4.75 per share all scrip bid for Alliance Aviation Services Ltd (ASX: AQZ). The deal is yet to receive shareholder or regulatory approval.
Meanwhile, the airline has taken on a 51% holding in online travel business TripADeal for an undisclosed sum.
On the back of Qantas' busy period, UBS has upped its price target for the company's shares. It now expects the stock to trade at $6.75 – representing a 22% premium on its previous close.
Qantas share price snapshot
The Qantas share price has been outperforming the S&P/ASX 200 Index (ASX: XJO) lately.
It has gained 7% since the start of 2022 while the index has slumped nearly 5%.
The airline's shares are also trading 15% higher than they were this time last year. Meanwhile, the ASX 200 has traded flat over the last 12 months.
Though, the stock is still around 15% lower than it was before the pandemic took hold.
