The Qantas Airways Limited (ASX: QAN) share price has been an exceptionally strong performer over the last 12 months.
As you can see on the chart below, during this time the airline operator's shares have risen an impressive 44%.
Image source: Getty Images
Can the Qantas share price keep rising?
Believe it or not, despite its very strong gains over the last 12 months, one leading broker says the Qantas share price can rise significantly from current levels.
According to a note out of Goldman Sachs, its analysts have retained their conviction buy rating and $8.50 price target on the company's shares.
This implies a potential upside of almost 30% for investors over the next 12 months.
What did the broker say?
Goldman has been looking at recent industry trends and feels comfortable with its estimates for FY 2024 and FY 2025. It continues to forecast materially higher earnings per share (EPS) compared to pre-COVID levels and feels this is not reflected in its valuation. It explains:
As a key beneficiary of the re-opening of the world post-COVID, we expect the airline's traffic capacity to return to 95% of pre-COVID levels by FY24e, with the airline's earnings capacity (EPS) expected to exceed that of pre-COVID levels by ~74%. We forecast a ~14% FY19-24e cumulative uplift in unit revenues (c. 2.5%pa), and ~50% drop-through of QAN's A$1bn+ structural cost-out program.
QAN's current market capitalisation and enterprise value are 6% above and 8% below pre-COVID levels. As such, we believe QAN is not priced for a generic recovery, let alone prospects for improved earnings capacity. We continue to see upside associated with substantially improved MT earnings capacity and include QAN in our regional Conviction List.
