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Qantas share price: 3 things to consider before FY20 results

We examine when the airline will report its full-year results, how analysts currently view the stock, and the implications of the company’s now completed capital raise.

When will the airline report its FY20 results?

Blue-chip airline Qantas (QAN) is set to report its full-year (FY20) results this Thursday, 20 August.

Analysts remain optimistic

In spite of the headwinds facing the global travel industry, analysts remain constructive on Qantas, assigning the blue chip airline an Overweight rating on average, according to the Wall Street Journal.

Those headwinds however look well reflected in the Qantas share price – even after rebounding strongly from its March-lows – the stock remains well off its 52-week highs, last trading around $3.60 per share.

Looking at the breakdown of the analyst consensus in more depth, the stock currently has 7 Buy ratings, 3 Hold ratings and 1 Sell rating, also according to the Wall Street Journal.

Of course, markets are as much about expectations as they are results – such likely explains the gap between the airline’s share price fluctuations and the average analyst consensus.

Beyond a lower share price, other analysts and commentators have sought to ‘look through’ the current short-term earnings outlook, instead choosing to focus on what Qantas will look like in a post-Covid world. In many ways this is both an appropriate and necessary approach – but one is left wondering just how much a post-Covid world will resemble the old pre-Covid world.

Beyond such thoughts, in late June, analysts from Morgan Stanley (MS) retained their Overweight rating on QAN and upgraded their price target from $5.20 per share to $5.30 per share, with a central component of this bullish thesis centring on the expectation of 'a faster return to 'normal' profitability (~FY22) and see further upside from there if cost savings are retained.’

In saying that, MS analysts are under no illusions about the short term difficulties Qantas is likely to face, expecting the airline to be loss making both in FY20 and FY21, until, as noted above, the company returns to profitability in FY22.

Retail investors turn pessimistic

In June Qantas announced plans behind a $1.9 billion capital raise. The institutional portion of this raise was completed in short order, with QAN raising $1,360 million in the process.

Indeed, it was off the back of this raise that Morgan Stanley analysts posited that ‘the improved liquidity position (net of restructuring costs) and increased variabilisation of the cost base provide an added buffer against any demand volatility through the recovery phase.’

Though institutional investors appeared eager to load up on Qantas, at the time, retail investors appeared less enthusiastic. The share purchase plan aimed at retail investors saw scant uptake: Qantas only raised $71.7 million of the ~$500 million initially planned from the SPP, at a participation rate of just 5%.

Management attributed this weak participation to stricter border closures across Australia as well as new clusters and outbreaks of Covid-19 – which both have potential negative implications for the domestic travel industry.

Positively at least, shares under the SPP will be issued at $3.18 per share, moderately below the Qantas closing price on Monday of $3.710 per share.

How to trade Qantas, long or short

Are you bullish or bearish on Qantas heading into its full-year earnings? Whatever your view, you can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) QAN using CFDs, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘QAN’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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