Own Qantas (ASX:QAN) shares? Morgan Stanley sees ‘significant upside’ to earnings

A couple carrying suitcases arm in arm at the airport.A couple carrying suitcases arm in arm at the airport.A couple carrying suitcases arm in arm at the airport.

Key Points

  • Investors overlooking ASX travel shares due to Omicron variant impact
  • Morgan Stanley bullish on Qantas, saying its robust balance sheet will withstand challenges
  • The consensus price target on Qantas is $6.02

Shares in airline operator Qantas Airways Limited (ASX: QAN) inched higher to close at $5 today, up 0.2% at the closing bell.

With international travel yet to normalise, investors are overlooking ASX travel shares like Qantas, especially given renewed economic pressure from the Omicron COVID-19 variant.

As such, the Qantas share price has struggled lately and is down considerably over the past 3 months. It has, however, held stable gains over the past year.

What’s the outlook for Qantas shares?

Despite the short-term noise, broker Morgan Stanley is bullish on the travel stock. It reckons Qantas investors could be in for a positive surprise come next earnings season.

Analysts at the firm note that Qantas’ third quarter tightening of capacity illustrates just how difficult it can be to manage an airline during this pandemic.

However, Morgan Stanley reckons investors should overlook the short-term noise. The broker is confident that “the balance sheet will withstand near-term challenges” and consequently sees “significant upside to earnings under ‘normal’ conditions”.

Morgan Stanley rates the airline a buy and values the company at $7 per share as of yesterday.

Meanwhile, the team at JP Morgan also rates Qantas a buy. They’ve assigned Qantas a $6.30 share price target. The firm remains comfortable on the “prognosis for a domestic aviation recovery” and sees capacity guidance of approximately 109% over 2H FY22 as achievable.

UBS also reckons that any potential threats are already priced into the Qantas share price at its current valuation. In an update last month, the Swiss broker valued Qantas at $6.20 per share and recommended that its clients buy in.

Based on a list of analysts covering Qantas provided by Bloomberg Intelligence, 84.6% rate it as a buy, with a consensus price target of $6.02.

Qantas share price snapshot

The Qantas share price is up 2.46% over the past 12 months to $5 today. Prior to the pandemic crash in February 2020, it was trading at $6.50.

The post Own Qantas (ASX:QAN) shares? Morgan Stanley sees ‘significant upside’ to earnings appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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