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The Commonwealth Bank of Australia (ASX: CBA) has shaken off this week’s malaise and is well into the green in afternoon trading.

At time of writing, the CBA share price is up 2.3% to $98.96 per share.

The S&P/ASX 200 Index (ASX: XJO) is gaining as well, up 0.3%.

If CBA finishes in the green today it will be the first time this week since Monday’s 0.1% rise that the CBA share price has closed the day higher.

Now here’s what’s been happening with CBA this week.

Interest rates are on the rise

Yesterday The Motley Fool reported that CBA had raised its fixed lending rates for owner-occupiers and investors.

Owner-occupiers will pay an extra 0.05% interest, bringing the fixed rate to 2.54%.

In a sign that the bank expects interest rates to keep rising longer-term, CBA’s 3-year fixed rate increased 0.15%, with borrowers now having to pay 3.14% interest. Add on another year and the 4-year fixed rate was bumped 0.25% to now stand at 3.34%.

RateCity’s research director, Sally Tindall noted that with the latest round of increases, the bank’s 3-year and longer fixed rates are now higher than they were before COVID struck.

In would could pose some difficulties for the Aussie housing market, Tindall added, “These fixed rates hikes aren’t isolated to the big four banks. The rate rises are coming in across the board from lenders big and small and we expect them to continue.”

The CBA share price closed flat yesterday.

CBA shares struggle amid price competition

Earlier in the week, The Motley Fool reported on the challenges facing CBA in recent months amid the past year’s record low interest rates.

Joseph Koh, a portfolio manager in Schroders’ Australian equities team, said both the Westpac Banking Corp (ASX: WBC) and CBA share price have been struggling as the banks are “more skewed towards residential mortgages relative to peers”.

“Extremely low interest rates have buoyed mortgage growth, but have also led to sharp price competition, particularly hurting CBA’s and Westpac’s profitability,” Koh said.

CBA share price snapshot

The CBA share price has been a strong performer in 2021, up 19%. By comparison, the ASX 200 has gained 10% year-to-date.

Over the past month, CBA shares have managed to notch up a 0.5% gain while the benchmark has retreated that same amount.

CBA pays a trailing dividend yield of 3.6%, fully franked.

The post What’s happening with the CBA (ASX:CBA) share price this week? appeared first on The Motley Fool Australia.

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• Could the CBA share price peak have been and gone?
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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 recommended Westpac Banking Corporation. 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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The CEO of buy now, pay later (BNPL) provider Latitude Group Holdings Ltd (ASX: LFS), Ahmed Fahour has told the media that many of his company’s ASX peers won’t survive through to 2024.

His comments, published yesterday afternoon, preceded the sector’s major downturn on Friday.

At the time of writing, the Latitude share price has seemingly dodged the worst of the carnage. It has fallen just 0.79% to trade at $1.89.

On the other end of the cacophony, the Afterpay Ltd (ASX: APT) share price has tumbled by 7.32% today. Its ASX peer Zip Co Ltd (ASX: Z1P) has fallen 5.6%. Sezzle Inc‘s (ASX: SZL) stock is also in the red, having slid 9.29%.

For context, the S&P/ASX 200 Index (ASX: XJO) is up 0.28% right now.

Let’s take a closer look at Fahour’s prediction for the ASX BNPL sector.

Will the ASX BNPL sector survive?

According to Latitude’s boss, the company will soon be one of only a few ASX-listed BNPL providers, with many going defunct in the near term.

Right now, 15 companies listed on the ASX are involved in the BNPL industry. That’s not including the likes of banking heavyweight Commonwealth Bank of Australia (ASX: CBA) and its StepPay offering.

Fahour told The Australian that Latitude will be among the survivors due to its 30 years of experience as a payment services provider.

The publication quoted him as saying:

[I]n the next 12-18 months, a lot of [ASX BNPL companies] will go out of business because the market won’t keep funding their losses.

The comments come days after BNPL industry expert Grant Halverson said the sector’s participants might be hard-pressed for capital in 2022.

Halverson noted a race to expand into the United States might see BNPL providers taking on more bad debts. This could hinder their ability to access finance facilities, he said.

Latitude’s offering is different to that of many BNPL companies. Its LatitudePay allows customers to pay in 10 instalments, rather than the industry norm of 4. It also offers LatitudePay+ for purchases of up to $5,000.

In addition to Fahour’s media appearance, Latitude’s latest international expansion may be buoying its share price, too.

Today, Latitude announced its move into Singapore in partnership with Harvey Norman Holdings Limited (ASX: HVN).

Its BNPL service will go live in 3 of Harvey Norman’s 12 Singapore stores this month.

The company is also moving into “bigger ticket BNPL” next year to differentiate itself from the broader Asian BNPL market.

Fahour commented on the company’s entry into Asia, saying:

Singapore is a major Asian commercial hub and a logical entry market for Latitude, boasting a vibrant retail sector with sophisticated consumers who are quick to adapt to digital innovation.

The post Latitude (ASX:LFS) boss warns many ASX BNPL companies “will go out of business” appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended AFTERPAY T FPO and Harvey Norman Holdings Ltd. 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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It has been another busy week for Australia’s top brokers. This has led to the release of a large number of broker notes.

Three broker buy ratings that you might want to know more about are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Accent Group Ltd (ASX: AX1)

According to a note out of UBS, its analysts have commenced coverage on this footwear retailer’s shares with a buy rating and $3.00 price target. The broker believes Accent is well-placed for growth post-COVID and sees opportunities for its margins to expand and its store network to grow in the coming years. The Accent share price is trading at $2.41 on Friday afternoon.

CSL Limited (ASX: CSL)

A note out of Morgans reveals that its analysts have retained their add rating and lifted their price target on this biotherapeutics giant’s shares to $334.70. This follows news that the company is acquiring Vifor Pharma. Morgans doesn’t believe this deal is a sign that CSL’s core business’ growth is coming to an end. Instead, the broker feels it is a complementary acquisition with a strong product portfolio that has growth opportunities. The CSL share price is fetching $273.31 on Friday.

Qantas Airways Limited (ASX: QAN)

Analysts at Citi have retained their buy rating but trimmed their price target on this airline operator’s shares to $5.86. This follows the release of a trading update from Qantas earlier this week. Although it will be posting a big first half loss, Citi remains positive on Qantas and believes the risk/reward on offer is attractive. Particularly given how at these levels, the broker thinks the International recovery is not priced in. The Qantas share price is trading at $4.82 today.

The post Brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro owns Life360, Inc. and Allkem Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Life360, Inc. 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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Brick by brick the Brickworks Limited (ASX: BKW) share price has delivered for the company’s shareholders so far in 2021.

Since the beginning of 2021, investors have been treated to the construction of a market-beating performance. Shares in the building products company have surged more than 27% higher, while the S&P/ASX 200 Index (ASX: XJO) has added ~9.7%.

The humble property investment and building materials business even dished out a record underlying net profit result this year. This was on the back of record property earnings as a result of a strong investor appetite for prime industrial property assets.

Taking all of this into account, I think we can chalk up 2021 as a win for Brickworks’ shareholders. However, money is not made looking at the past. Let’s take a look at how next year is looking for the Brickworks share price.

Piggybacking the property boom

Brickworks is undoubtedly a beneficiary of the booming property market — both residential and industrial. An increase in residential building activity during FY21 boosted the company’s building products division. While the hot housing market isn’t expected to grow as fast in 2022 as it did in 2021, it’s still expected to grow.

Importantly, senior economists at Australia and New Zealand Banking Group Ltd (ASX: ANZ) are tipping that the Reserve Bank of Australia won’t raise rates next year. As a result, we could see capital city prices rising a further 6% next year. This bodes well for the Brickworks share price, as it indicates a potential driver for its building products.

Meanwhile, another important part of the company’s operations is its property division — making up 19% of the group’s assets. Positively, property agent Knight Frank shares a bullish outlook on industrial property for the year ahead.

In its 2022 outlook report, the Knight Frank team forecast further demand for prime industrial property next year. Commenting on this, the head of industrial research, Katy Dean said:

We are seeing multiple drivers put upward pressure on industrial rents, with the strong and sustained demand also pushing down vacancy of existing stock at a rate that developers are unlikely to be able to deliver new stock to address

In FY21, Brickworks’ property portfolio increased dramatically, rising 89% to $204 million at the end of the financial period.

Analyst forecasts for Brickworks share price in 2022

Despite an incredible year — pending the remaining 14 days — some analysts are predicting further upside to the Brickworks share price.

For example, Ord Minnett has labelled the materials company a buy with a price target of $27.50. An expanding portfolio of attractive assets and increasing earnings has this broker enticed by the company’s prospects.

Similarly, Citi sees an opportunity in the Brickworks share price. Analysts at the investment bank have come to the conclusion that the company could be worth $30 per share. This would suggest there’s approximately 20% in gains still on the table.

The post How is 2022 shaping up for the Brickworks (ASX:BKW) share price? appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Brickworks. The Motley Fool Australia owns and has recommended Brickworks. 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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The Northern Star Resources Ltd (ASX: NST) share price is rocketing higher on Friday afternoon. It appears investors have changed their sentiment on the company following a spike in gold prices last night.

At the time of writing, Northern Star shares are swapping hands for $9.48, up 5.92%.

Other fellow gold miners have also taken charge, with Newcrest Mining Ltd (ASX: NCM) shares fetching for $23.77, up 5.09%, and Evolution Mining Ltd (ASX: EVN) shares trading at $3.98 apiece, up 5.29%.

What’s driving Northern Star shares higher?

Investors are rallying up the gold mining company after the expensive metal rose overnight. Yesterday, the price of gold was hovering around US$1,780 an ounce. However, following the United States’ Federal Reserve tapering announcement, gold has currently shot up to US$1,802 an ounce.

The Federal Reserve advised that its stimulus program will be coming to an end soon as inflation begins to rise. As such, the central bank will be buying $60 billion of bonds each month starting next year in January. In contrast, this is about half of the amount it bought before November and $30 billion less than in December.

In addition, the Federal Reserve also signalled as many as three rate hikes in 2022 to limit the increase in inflation. Supply and demand imbalances due to COVID-19 along with the reopening of the economy have led inflation to spike.

In 2021, inflation is expected to jump by 5.3% compared to a previous forecast of 4.2%. For 2022, inflation is predicted to settle at a more reasonable level of 2.6% as a result of the Federal Reserve’s policy changes.

Recently, Northern Star managing director and CEO, Stuart Tonkin made an on-market transaction buying more of the company’s shares. What was considered as a bargain buy for $8.86 per share has now been confirmed.

Shareholders were also able to get in on the action as the Northern Star share price fell to $8.74 yesterday.

For those investors who followed in the CEO’s footsteps, the investment is already starting to pay off.

About the Northern Star share price

Over the last 12 months, the Northern Star share price is down by around 25%, with year-to-date the same.

On valuation grounds, Northern Star commands a market capitalisation of approximately $11.04 billion, with roughly 1.16 billion shares outstanding.

The post Why is the Northern Star (ASX:NST) share price surging 6% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras owns Northern Star Resources 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 Bruce Jackson.

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Shares in Strike Energy Ltd (ASX: STX) are set to close the week more than 21% in the green and are currently trading at 21.25 cents apiece.

Whilst there’s been no market-sensitive information released by the company today, Strike’s share price popped on Wednesday after it advised that its Project Harber received major recognition from state and federal authorities.

Why’s Strike Energy charging higher this week?

Given the recent market turbulence caused by the AdBlue crisis, Strike’s Project Harber has received Lead Agency Status from the Western Australian Government as a potential domestic urea manufacturer.

Adding to this, the federal government has also thrown a $2 million grant Strike’s way as a part of its supply chain resilience initiative.

The Adblue saga has been bought about as Australia is about to run out of the mixture in a number of weeks. Urea is a major ingredient in AdBlue, and Strike is poised to benefit as a domestic producer of the chemical should its Project Harber successfully commercialise.

Moreover, Intec Pivot Ltd (ASX: IPL), owner of Australia’s sole urea production facility, will be closing its urea operations as of next year, adding to the scarcity of the product.

This poses a risk to both Australian vendors and users of urea as prices are susceptible to volatility in foreign markets and to exchange rate risks.

And with many agricultural commodities in the midst of a cyclical upswing, one might be right to correctly fear those risks. Wheat prices are up 21% this year to date for instance, whereas palm oil, canola, cotton, corn and even rice are all ranging 20-60% higher since January 1 also.

Project Harber is set to be a 1.4mpta urea fertiliser production facility built near Geraldton in WA’s Mid Wes Region. Strike says the venture would replace Australia’s reliance on more than $1 billion of fertiliser imports each year, by providing a “local producer, top quality fertiliser that would improve Australian agriculture’s competitiveness and reduce the carbon intensity of Australian farming”.

It is in the Pre-FEED stage, with design work being carried out by Technip Energies. Earlier in May 2021, Strike closed expressions of interest for fertiliser offtake from Project Haber, which was oversubscribed 2.5x the proposed plant’s capacity.

Strike has plans to undertake a competitive process in Q4 2021 to seek interest from equity partners to fund the capital requirement of the project, with Strike expecting to retain a 30% interest.

Aside from this, Project Haber will be a large hydrogen-consuming facility and is, therefore, a key player in the value chain for hydrogen production and usage.

Investors piled into the company following the news, sending its share price north on the day. The buying has continued until today, on tremendous volume that’s surmounted to 183% of its 4-week average.

Strike Energy share price summary

In the last 12 months Strike Energy has posted a loss of 24%, spurred on by a 25% drop this year to date.

Over the past single month, it has reversed course and is 25% in the green after reclaiming some territory this week.

The post Strike Energy (ASX:STX) share price leaps again, up 21% this week. Here’s why appeared first on The Motley Fool Australia.

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The author has no positions in any of the stocks mentioned. 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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The Carnaby Resources Ltd (ASX: CNB) share price is blasting off today after a major copper discovery.

Shares in the mining company were trading at 43 cents at the time of writing, up 46.55%.

Carnaby is a mineral exploration company focused on developing gold, copper and other mineral deposits in Australia, Norway and Sweden.

What did Carnaby announce?

In today’s release, Carnaby informed the market it has made a spectacular copper discovery within the Nil Desperandum Prospect. This project is located within its Greater Duchess Copper-Gold Project in Mount Isa, Queensland.

The company reported that its drilling program had intersected a 24m zone of “semi massive copper sulphide mineralisation”.

This is the largest copper mineralisation zone discovered by the company at this exploration site to date.

However, Carnaby said further drilling would be required to verify the orientation and length of the copper mineralisation.

The company will continue drilling until December 20 and start again in early 2022.

Carnaby said it would boost its exploration efforts at the project in light of the copper discovery announced today.

The company plans to complete further IP surveys and secure more drill rigs to target more copper mineralisation.

Management comment

Speaking on the copper find, Carnaby managing director Rob Watkins said:

Nil Desperandum is rapidly emerging as a major copper gold discovery in one of Australia’s premier copper districts located only 70km from Mt Isa and surrounded by world-class infrastructure.

The deposit appears to be getting bigger and better at depth and we are now fast-tracking further IP geophysical surveys to help guide a follow-up drilling program, which will commence in Q1 2022.

Carnaby share price snap shot

The Carnaby share price has surged more thaN 41% in the past 12 months.

The value of the company’s shares has shot up 46.5% in the past month and a mammoth 57% in the past week.

The mining explorer has a market capitalisation of around $50 million based on its current share price.

The post Carnaby Resources (ASX:CNB) share price explodes 46% on ‘spectacular’ copper find appeared first on The Motley Fool Australia.

More reading

• Carnaby (ASX:CNB) share price rockets 33% on lithium update

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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The Downer EDI Limited (ASX: DOW) share price is edging higher on Friday afternoon. This comes after the company announced an update on the divestment of its Open Cut Mining East business.

At the time of writing, the integrated services company’s shares are 1.45% higher to $5.97.

Downer concludes divestment

In its release, Downer advised it has completed the sale of its Open Cut Mining East business to Bukit Makmur Mandiri Utama (BUMA).

Established in 1998, BUMA is currently the second largest independent coal mining contractor in Indonesia. The company holds around 20% market share in the country, providing coal mining services to large Indonesian firms.

BUMA’s operations are supported by roughly 12,000 employees as well as being equipped with over 2,500 units of heavy equipment.

Downer will receive about $150 million in cash proceeds for its Open Cut Mining East business. So far, BUMA has paid a deposit of $16 million with the remaining amount to be paid in the immediate future.

The transaction includes the transfer of the assets, liabilities, employees and all existing contracts.

This is Downer’s last step in exiting its capital-intensive mining businesses. The divestment includes the Open Cut Mining West, Downer Blasting Services, Underground mining, Otraco, the Snowden consulting business and the RTL Mining and Earthworks joint venture.

Together, the total proceeds from the company’s divestment program amount to $778 million.

It appears that the additional cash injection has rallied investors, having a positive effect on the Downer share price.

About the Downer share price

Over the past 12 months, the Downer share price has gained 11% with year-to-date around 12% in the green. Interestingly, the company’s shares fell from their 52-week high of $6.87 in October after announcing the sale of the Open Cut Mining East business.

Based on today’s price, Downer commands a market capitalisation of around $4.09 billion and has approximately 685.62 million shares outstanding.

The post Downer (ASX:DOW) share price lifts on $150 million payday appeared first on The Motley Fool Australia.

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• Is the A2 Milk (ASX:A2M) share price now too cheap to ignore?
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. 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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The A2 Milk Company Ltd (ASX: A2M) share price has sank just over 50% in 2021 (to today).

It has fallen so much, could it actually be an opportunity because investors have gone too pessimistic and it’s now good value, even with its problems?

Broker ratings on the A2 Milk share price

One of the latest brokers to have their say on A2 Milk is Credit Suisse.

The price target from the broker on A2 Milk is $5.75. That is higher than where it is today, but it doesn’t signify a huge return over the next 12 months, just a mid-single digit rise.

A2 Milk may be seeing lower sales on lower demand because of a slowing birth rate in China. However, a positive is seemingly higher prices for its products in China.

Based on Credit Suisse’s numbers, the A2 Milk share price is valued at 27x FY23’s estimated earnings.

However, some brokers are far more positive on the infant formula and milk business.

For example, Citi currently rates it as a buy with a price target of $7.30. That suggests that the A2 Milk share price could rise by more than 30% over the next year if the broker is right.

Citi notes that A2 Milk’s inventory is getting better and it has changed things with distributors to improve the situation.

Actions taken to improve things

A2 Milk says that the 2021 result was disappointing. However, it has taken a number of actions to try to address the COVID-19 disruption.

It has recognised stock write-downs and deliberately slowed down sales, together with other planned initiatives, to reduce inventory levels and rebalance English label infant formula pricing across channels.

A2 Milk has swapped older distributor inventory with more recent stock to improve the on-shelf product freshness.

The company has also done other things like spending on more marketing, improved its leadership team and re-organised its Asia-Pacific division.

Profit margin expectations

A2 Milk has an ambition to grow sales to over NZ$2 billion and improve margins. The earnings before interest, tax, depreciation and amortisation (EBITDA) margin target is “probably in the ‘teens’ in the medium term” due to market conditions and in the longer-term the target is in the “low-to-mid-20s” subject to a better recovery.

Trading update

In terms of sales, English label infant formula sales in the first quarter of FY22 were down on the first quarter of FY21, but “significantly up” on the fourth quarter of FY21. FY22 first half English label sales are expected to be down year on year, but ahead of expectations.

Chinese label infant formula sales in the first quarter were “constrained” to reduce channel inventory levels. Sales were down significantly year on year and on the fourth quarter of FY21. Chinese label infant formula sales are expected to be significantly down in the FY22 first half.

However, tier 1 inventory levels are now at required levels for both English and Chinese label products.

ANZ fresh milk volumes were up in the first quarter of FY22 year on year, though in New Zealand dollar terms the sales were flat because of foreign currency fluctuations.

US liquid milk volumes were down in the first quarter of FY22 compared to the first quarter of FY21 after the reduction of ranging by a club channel customer. Distribution cost pressures continue in the US market.

A2 Milk share price valuation

Getting back to Citi’s thoughts, on the broker’s numbers, A2 Milk shares are valued at 27x FY23’s estimated earnings.

The post Is the A2 Milk (ASX:A2M) share price now too cheap to ignore? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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 recommended A2 Milk. 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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Shares in Aussie airline Qantas Airways Limited (ASX: QAN) have been at the back end of the pandemic-induced frenzy in financial markets this year.

The ‘reopening trade’ has been tried and tested on several occasions, however new COVID-19 variants and volatile case numbers have put a dent in its full lift-off each time.

With most commentary pointing to a gradual return to full mobility in global borders by 2022, we seek to answer if Qantas is worth the allocation of investors’ hard-earned capital right now.

Following the company’s trading update yesterday, it has been attracting upgrades en masse from leading brokers. So is it a buy? Let’s take a look.

What’s the verdict on Qantas shares?

The team at Jefferies were happy with the takeouts from Qantas’ trading update. They noted movement on the company’s debt position, even whilst trimming its earnings expectations at the same time.

The firm is a long-term bullish supporter of Qantas. It values the company at $5.95 a share after paring its target by about 9% today.

Qantas came in with a deeper underlying EBITDA forecast for 1H. It expects a loss of $250 million to $300 million versus Jefferies’ estimate of $101.5 million.

As such, the firm updated its modelling to reflect a pre-tax loss of $1.05 billion. This is a substantial increase on the previous $623 million loss forecasted previously.

However, Jefferies was impressed by Qantas’ efforts at reigning in its debt to $5.65 billion towards the end of December.

“While the 1H EBITDA is below expectations – driven by cost increases from the restart of international flying and longer lockdowns – recovery of travel demand is expected to remain uneven, offering opportunities,” Jefferies says.

Analysts at Macquarie also upgraded their price target and rated Qantas a buy with a valuation of $6.10 per share.

The firm notes that domestic and international border policies are loosening, which is setting the company up for a “snap-back in profitability in 2H FY22”.

It actually sees earnings in FY23 surpassing pre-Covid levels, considering the raft of structural changes and asset divestments in recent times.

JP Morgan also rates Qantas a buy with a $6.50 price target for June 2022. The firm notes that Qantas appears to be well-positioned to weather the airline industry’s recovery.

It takes this view because Qantas has taken a material $1 billion in costs per annum out of its business. This is likely to become an ongoing saving from FY23, JP Morgan says. Further, the broker favours Qantas’ high proportion of earnings from domestic and loyalty at approximately 70-75% of earnings.

It also likes Qantas’ balance sheet and its more favourable competitive position both domestically and internationally.

Fellow broker Citi also chimed in and valued Qantas at $5.86 per share in a note to clients today. Citi acknowledged concerns about the Omicron variant but still believes the risk-reward equation is skewed towards investors’ favour.

The broker reckons the market is yet to price in the international division reopening, which could bode well for the Qantas share price.

Meanwhile, Credit Suisse raised its price target on Qantas by 12% to $4.60 per share. Ord Minnett retained its buy rating on the stock, noting it remains comfortable with the prognosis for the aviation industry.

Of the list of analysts provided by Bloomberg Intelligence, 11 rate Qantas a buy and just 1 says hold. Out of this spread, the consensus price target is $6.07 on Qantas shares. This is a 27% return objective from the current market price of $4.77.

So consulting this list, the sentiment appears to be bullish on Qantas shares, particularly after its most recent trading update. Time will tell if the thesis plays out in full.

Qantas share price summary

It’s been a year to forget for Qantas shareholders, with a share price loss of 6% in the past 12 months.

In the past month, Qantas shares have plunged by almost 15% into the red.

The post Could Qantas (ASX:QAN) shares prove to be a compelling investment in 2022? appeared first on The Motley Fool Australia.

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• Qantas (ASX:QAN) share price descends on $1.1bn half year loss guidance
• ASX 200 (ASX:XJO) midday update: CSL sinks, Qantas’ $1.1bn+ first half loss
• Qantas (ASX:QAN) share price on watch after ‘one of the worst halves of the entire pandemic’
• 5 things to watch on the ASX 200 on Thursday

Citigroup is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. 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 recommended Macquarie Group Limited. 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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