Expert reveals why ‘a premium is warranted’ for Qantas shares in October

Qantas Airways Limited (ASX: QAN) shares finished 2.51% higher on Wednesday at $5.30 apiece.

This outperformed the overall market, which rallied for a second day due to the Reserve Bank’s lower-than-expected rate hike yesterday.

The S&P/ASX 200 Index (ASX: XJO) finished up 1.74% to 6,815.7 points.

Expert says Qantas shares worth a premium

Tony Paterno of Ord Minnett says Qantas is a buy.

On The Bull this week, Paterno said Qantas has a “superior domestic market structure and share”.

He said:

Given its superior domestic market structure and share, a restructured and more variable cost base, a strong balance sheet and potential upside from the loyalty program, we believe a premium for Qantas is warranted.

Qantas fell in September

The Qantas share price hit some turbulence in September, as my colleague Tristan reported.

There was no price-sensitive news from the company last month. However, the market continued to worry about the impact of rising inflation, interest rates, and fuel costs on the airline.

As Tristan reported, Qantas is working on several cost and revenue initiatives to offset the impact of higher inflation and fuel costs.

One of them is reducing its domestic capacity by another 10%. The company said some capacity may be restored once “operational resilience” improves.

In the first half of FY23, capacity will be 95% of pre-COVID levels and in the second half, it will be 106% of pre-COVID levels.

Qantas share price snapshot

Over the past year, the most investors have been willing to pay for Qantas shares is $5.97.

That’s where the ASX travel share was trading in November last year.

In December 2019, before the pandemic, Qantas was trading at a historical five-year high of $7.46 a share.

The post Expert reveals why ‘a premium is warranted’ for Qantas shares in October appeared first on The Motley Fool Australia.

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More reading

• Did ASX travel shares do well in September?
• The Qantas share price hit some turbulence in September
• Why did the Qantas share price have a lousy end to the week?
• Qantas share price follows ASX 200 lower despite Jetstar CEO news
• Why is the Qantas share price flying higher than the ASX 200 this month?

Motley Fool contributor Bronwyn Allen has positions in Qantas Airways Limited. 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 Scott Phillips.

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