Qantas shares: Buy, hold, or fold?

Could the airline's stock really offer 25% upside?

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Key points
  • The Qantas share price has recovered to its pre-COVID levels this week following news it's expected to return to profit imminently 
  • Many brokers have upped their expectations of the stock in light of its latest guidance upgrade
  • Indeed, two top brokers believe it could rise another 25%

The Qantas Airways Limited (ASX: QAN) share price has pushed through plenty of turbulence over the last few years.

It hit an all-time high of $7.46 in late 2019 before crashing to a low of $2.03 when the COVID-19 pandemic took hold in March 2020, decimating the travel industry.

But things appear to be looking up for the S&P/ASX 200 Index (ASX: XJO) airline share this month.

It announced last week it's expecting to return to profitability in the current half, and its stock reached a new post-pandemic high of $6.075 yesterday.

The Qantas share price is currently trading 0.3% lower at $5.98. Meanwhile, the ASX 200 is down 1.08%.

So, does stock in the national carrier look like it could be about to take off? Let's take a look at what experts think.

A man sits in the airport terminal with a laptop and credit card, ready to make a travel booking.

Image source: Getty Images

Is the Qantas share price on an upwards trajectory?

The Qantas share price could be in for a good year if many brokers are to be believed.

Many are tipping the flying kangaroo to soar as much as 25% following the release of the company's latest update.

The airline now expects to post an underlying pre-tax profit of between $1.2 billion and $1.3 billion for the first half of financial year 2023. It comes after the company posted $7 billion of losses over five consecutive halves.

The company's first-half guidance is close to what Citi expected from it over the entirety of the fiscal year.

The broker said the fact was an "almost embarrassingly large beat to us and the market", my Fool colleague James reports.

Qantas also expects its net debt to have fallen to between $3.2 billion and $3.4 billion by the end of this year – below the bottom of its targeted range.

Following the release of the update, both JP Morgan and Morgan Stanley upped their expectations for the stock.

They each slapped Qantas shares with an overweight rating and a $7.50 price target.

Barrenjoey is also said to be bullish, tipping the stock to rise to $7.40. The broker reportedly said, as per the Australian Financial Review:

The market [apparently] remains concerned about the impact of a slowdown in consumer spending in 2H23.

We have capacity at 80% of pre-COVID levels in FY23 while demand is closer to 100%. Time will tell but, in our view, this should give Qantas some leverage to absorb a potential slowdown and … the company is better placed to deal with this slowdown than in prior periods.

Meanwhile, the continually bearish Citi is the least optimistic. It has a neutral rating and a $5.78 price target on Qantas shares.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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. has positions in and has recommended JPMorgan Chase. 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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