The S&P/ASX 200 Index (Index:^AXJO) is poised to open weaker this morning. But the pullback might be an opportune time to buy National Australia Bank Ltd. (ASX: NAB) and Westpac Banking Corp (ASX: WBC).

The broader market weakness is no thanks to weak leads from Wall Street on worries that stocks have run too far ahead of fundamentals.

But there’s value to be found in the NAB share price and Westpac share price, at least that’s according to UBS.

Last few places on the ASX to find value

The broker just upgraded these stocks to “buy” from “neutral” as the sector is one of the last few places you can find value.

It isn’t only the COVID-19 pandemic that’s been weighing on bank shares. Competition from fintechs, pressure from the banking regulator to increase their cash buffers, the fallout from the Haynes Royal Commission and tumbling interest rates are just some of the other punishing headwinds.

Shares in the big banks, excluding Commonwealth Bank of Australia (ASX: CBA), are trading at their lowest multiples in 27 years, noted UBS.

Light at the end of the tunnel

“However, with the economic outlook less bleak than anticipated even a few weeks ago,” said the broker.

“The likelihood of a further deterioration in asset quality and RWA [risk weighted asset] inflation driving additional highly dilutive capital raisings has reduced materially.

“The lower reliance on JobKeeper (wage subsidies) than government expectations also provides some flexibility for further targeted stimulus as current packages, loan deferrals and rental relief expires in October.”

Banks will recover ahead of the economy

While we the coronavirus will continue to have an impact on the economy until a vaccine is found, the broker pointed out that the market factor in the recovery before then, barring a sharp deterioration in the economy.

It’s also worth noting that the damage from the COVID-19 crisis hasn’t been as bad as what many experts (and the government) were expecting. Despite this, the government is adding to its record stimulus to get our economy back on its feet.

ASX banks could re-rate

What this means is that the threat of ballooning bad debt shouldn’t be as bad as forecast, and that will be a trigger for a re-rating in the sector.

“Although sustained low rates will weigh on NIM [net interest margin] and credit growth will be anaemic, a sector ROE of ~9% looks possible,” said UBS.

“At these levels, the banks could re-rate to around book value, and with an 80% payout ratio offer ~7.2% dividend yield.”

More reading

• Is the Westpac share price too high?
• Is today’s BHP, NAB or Afterpay share price a good investment?
• 5 things to watch on the ASX 200 on Friday
• ASX 200 rises 0.8%, travel shares fly higher
• This ASX 200 stock is well placed to beat earnings expectations

Motley Fool contributor Brendon Lau owns shares of Commonwealth Bank of Australia, National Australia Bank Limited, and Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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The Qantas Airways Limited (ASX: QAN) share price was a strong performer on Thursday.

The airline operator’s shares jumped 7% to $4.49 after announcing plans to increase the number of domestic flights in June and July.

What did Qantas announce?

With travel restrictions starting to ease across the country, both Qantas and Jetstar will increase their domestic and regional flying for June and July.

According to the release, the additional services will see capacity increase from 5% of pre-pandemic levels, to 15% by the end of June. This represents an increase of more than 300 return flights per week.

The company is prepared to further increase the number of flights it operates in July. This will depend on travel demand and the further relaxation of state borders. Qantas revealed that it has the ability to increase the number of flights to upwards of 40% of its pre-crisis domestic capacity by the end of July.

Where will Qantas be flying to?

The company advised that the additional flights include more services on capital city routes. This is particularly the case with Melbourne-Sydney and a number of routes to-and-from Canberra.

As travel restrictions start to ease domestically, Qantas and Jetstar will increase domestic and regional flying for June and July, with more than 300 additional return flights per week by the end of June. Read more: https://t.co/iW5sNBpPtZ pic.twitter.com/DNO3HM2p57

— Qantas (@Qantas) June 4, 2020

https://platform.twitter.com/widgets.js

As you can see above, it will also increase intra-state flights for Western Australia, Queensland, New South Wales, and South Australia. Weekly flights to Broome, Cairns, and Rockhampton will see also receive significant boost.

In addition to this, flights will resume on eight routes that are not currently being operated. This includes flights from Sydney to Byron Bay, which previously saw its route launch postponed because of the pandemic.

Will there be enough demand?

Also supporting the Qantas share price on Thursday were positive comments by Qantas CEO, Alan Joyce.

Mr Joyce believes Australians are eager to take to the skies again. He commented: “We know there is a lot of pent up demand for air travel and we are already seeing a big increase in customers booking and planning flights in the weeks and months ahead.”

“We are gradually adding flights in June as demand levels increase, which will go from 5 per cent of pre-crisis levels currently to 15 per cent by late June. We can quickly ramp up flying in time for the July school holidays if border restrictions have eased more by then,” Joyce added.

Mr Joyce also revealed that Qantas is taking precautions to make the flying experience safe for travellers.

He explained: “Customers will notice a number of differences when they fly, such as masks and sanitising wipes, and we’ll be sending out information before their flight so they know exactly what to expect and have some extra peace of mind. Importantly, the Australian Government’s medical experts have said the risk of contracting Coronavirus on an aircraft is low.”

Overall, this looks like a big positive for Qantas and should help limit the cash burn it is currently experiencing.

More reading

• ASX 200 rises 0.8%, travel shares fly higher
• This ASX 200 stock is well placed to beat earnings expectations
• Why the Alliance Airlines’ share price is surging higher
• Is the Qantas share price a buy?
• Why Afterpay, Infigen, Qantas, & Zip Co shares are charging higher

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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The Appen Ltd (ASX: APX) share price will be one to watch this morning after an announcement by the global leader in the development of high-quality, human-annotated training data for machine learning and artificial intelligence.

What did Appen announce?

Appen’s announcement after the market close on Thursday revealed that a number of executives have been selling shares this week.

The biggest seller was Non-Executive Chairman, Chris Vonwiller. He offloaded 2 million Appen shares on-market for an average of $29.00 per share. This represents a total consideration of $58 million.

Also selling shares was the company’s CEO and Managing Director, Mark Brayan. He sold 95,535 shares for an average of $30.60 per share. This equates to a total consideration of approximately $2.9 million.

And finally, another insider that was selling shares was Non-Executive Director, Bill Pulver. Mr Pulver sold 275,000 shares on-market for an average of $30.6865 per share. This represents a total consideration of $8.4 million.

Why were they selling shares?

Appen helpfully provided explanations for each of the sales.

Mr Vonwiller sold his shares for a number of personal reasons, including philanthropic endeavours.

Whereas the company’s CEO was selling shares to satisfy tax obligations and diversify personal investments. The latter was the reason Mr Pulver gave for selling his shares.

It is worth noting that all three directors still have sizeable shareholdings, even after these sales.

Should you be concerned?

Insider selling rarely goes down well with investors. The theory is that if a director was confident its shares would go a lot higher from here, they wouldn’t sell them today. So, the decision to sell is often interpreted to be a bearish indicator.

However, I think the explanations they have given is reasonable. And as I mentioned above, they still have plenty of their wealth tied up in the company.

In light of this, if the Appen share price were to pullback meaningfully on the news, I would consider picking up shares.

After all, given the strong growth potential the company has over the next decade, I believe its shares could be a lot higher than this level in 2030.

More reading

• 3 small cap ASX tech shares that could be stars of the future
• 5 things to watch on the ASX 200 on Friday
• 3 stellar ASX growth shares I would buy right now
• Are Megaport shares the ones to buy and hold beyond 2030?
• Where to invest $5,000 into ASX 200 shares immediately

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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