The Qantas Airways Limited (ASX: QAN) share price overcame the market turbulence on Monday and took off.
The airline operator's shares rose 2% to $6.28, whereas the ASX 200 index dropped 1.1% to 7,224.8 points.
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Can the Qantas share price keep flying?
The good news for investors is that one leading broker believes Qantas shares are barely off the runway.
According to a note out of Goldman Sachs, its analysts have responded to the company's half-year results by retaining their buy rating with an improved price target of $8.30.
Based on the current Qantas share price, this implies potential upside of 32% for investors over the next 12 months.
What did the broker say?
Goldman Sachs was pleased with Qantas' half-year results, which was largely in line with expectations. It commented:
$1.43bn of PBT was within 1% of GSe and consensus and in the top-half of management's guidance range of $1.35-1.45bn. Adjusted net debt was $2.4bn (-1% vs GSe) compared with $3.9bn as at Jun22. This compares with QAN's revised (dynamic) target range of $3.9-4.8bn. The company also announced a $500m buyback in 2H23, vs GSe $400m.
And while the broker acknowledges that airfares may now have peaked, it doesn't expect this to stop Qantas from delivering bumper earnings in the near term. It feels this makes its shares great value, particularly in comparison to pre-COVID times. It explained:
Notwithstanding a decline in unit revenues (and group capacity still at 96% of pre-COVID), our estimated FY24e EPS sits 65% above pre-COVID levels. Despite this, QAN's market capitalisation is 1% below pre-COVID levels (EV 14% lower). We acknowledge broader macro uncertainty at this point in the cycle, but we believe the current share price does not reflect the group's improved earnings capacity. Our 12m TP increases slightly to A$8.30 (A$8.20 prev.); retain Buy.
