The Qantas Airways Ltd (ASX: QAN) share price had an excellent 2024, rising more than 69%. However, that was last year. What can the ASX travel share achieve in 2025?
Past performance is not a guarantee of future performance, particularly with a return as high as 70%. There's no guarantee that Qantas will remain at its current valuation of above $9.
The company has benefited from ongoing strong demand for travel, which has also helped with achieving appealing airfares. Plus, fuel costs have reduced in the last few years following the Russian invasion of Ukraine.
So, let's look into whether the business could be a top performer again in 2025.
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Is the current Qantas share price valuation justified?
When Qantas shares were trading at $8.94 in late December, the broker UBS gave some thoughts on why the airline had flown so high in 2024:
We believe the rally in international airlines and the broader market has provided a strong tailwind; however, we also believe growing confidence in the sustainability of post-COVID earnings and, in turn, consensus forecasts stabilising is allowing the multiple to re-rate.
In other words, Qantas has partly benefited from the rally in the share prices of other airlines and the overall ASX share market.
UBS also believes that other experts are more confident that the current earnings level can be maintained after all of the travel disruptions during the pandemic.
Can it rise even further in 2025?
The broker is seeing "strong momentum in fare growth" for both domestic and international with Qantas and Jetstar brands. If fares strengthen, UBS thinks Qantas' profit could beat the projections of what the broker and the market are expecting.
UBS forecasts Qantas could generate $23.5 billion of revenue, $2.58 billion of operating profit (EBIT) and $1.64 billion of net profit after tax (NPAT) in FY25. This could translate into earnings per share (EPS) of $1.06 and enable a dividend per share of 20 cents per share.
At the current Qantas share price, that means the airline is valued at less than 9x FY25's estimated earnings with a possible dividend yield of 2.1%, excluding possible franking credits.
UBS currently has a price target of $9 on the airline, which implies a slight fall in 2025. However, as the broker noted, if Qantas' earnings impress, then it could justify a higher valuation than $9. But that may require the ASX travel share to outperform expectations.
