Qantas Airways Ltd (ASX: QAN) shares have been under significant pressure this month.
So much so, the airline operator's shares are down 13% from the 52-week high they reached earlier this month.
Image source: Getty Images
What are brokers saying?
The team at Goldman Sachs has been looking at the company and remains very positive.
It highlights that the weakness has been driven largely by updates from Qantas' US peers. The broker explains:
UAL, DAL, AAL shares (all covered by Catherine O'Brien) are down mid-teens % after providing weaker-than-expected MarQ updates. The largest downward revisions were at AAL and DAL, with all the airlines that provided updates lowering unit revenue expectations except JetBlue (unchanged). This was largely explained by a mix of transitory impacts and softer demand due to the uncertain macro backdrop.
DAL and UAL called out the brunt of demand impact in domestic, non-premium cabins (no change to international and premium), with American echoing premium and international revenue growth trends still consistent with expectations.
However, Goldman doesn't believe investors should read too much into these updates. Especially given how Qantas only recently spoke about trading conditions.
In addition, the broker highlights the differences between the two markets. It adds:
QAN shares have traded down ~13% over the last week, largely driven by (in our view) concerns over US carrier updates. As recently as late-Feb25 QAN reiterated generally resilient demand, particularly for value leisure and corporate travel (which continues to recover).
We note that guidance for Group Domestic unit revenue growth of 3-5% in 2H25e was ahead of our prior forecast, while Group International is stabilizing and should inflect higher in the 4Q25e. Near term, QAN should also benefit from the Easter/ANZAC day alignment and the Australian Federal Election. More fundamentally, we highlight a materially different market structure for domestic air travel in Australia relative to the US (albeit US airlines have also displayed timely supply discipline post-COVID).
Qantas shares tipped to rebound
The note reveals that Goldman Sachs has reaffirmed its buy rating and $11.80 price target on Qantas' shares.
Based on its current share price of $9.03, this implies potential upside of 30% for investors over the next 12 months.
Overall, the broker feels that the company's valuation is still attractive at current levels. It concludes:
Valuation is still attractive in our view. We believe that QAN's earnings capacity has sustainably improved since COVID, which provides a solid foundation for QAN's next stage of growth. The 1H25 results/ FY25 guide also reflected early upside associated with initial deliveries from QAN's fleet renewal program. Despite peer weakness and subsequent valuation gap vs peers narrowing, QAN is trading at a discount vs regional and US peers and at lower PE vs pre-COVID.
