Qantas share price: What's the outlook following market update?

The Qantas share price (ASX: QAN) has risen over 20% in the last 6-months, but one investment bank sees further upside from current price levels.

An improving situation

Airline and travel businesses have been some of the most impacted by the coronavirus pandemic.

Australia’s premier airline – Qantas (ticker: QAN) – has in no way been immune. Despite a dominant market position leading into the pandemic, border closures and travel restrictions have placed immense pressure on the airline’s financial health and brand reputation.

Things look to be turning around, with Qantas on Thursday raising its domestic travel guidance. The stock however, remains off its 2019, pre-pandemic high.

Domestic capacity outlook

As a result of significant pent up demand for domestic travel, Qantas yesterday raised its Q4 domestic capacity guidance, as part of what was a relatively positive market update. This demand, said the airline has been driven by the Australian government’s half-price fare offering as well as corporate and SME related travel.

Key Implication: Qantas said it now expected Q4 FY21 domestic capacity to hit 90% of pre-covid levels. This represents a 10% improvement against previous estimates.

Management noted that this was based on the assumption that there would be no 'significant border closures'.

Looking forward, the airline said it expected domestic capacity to normalise further in FY22, with Jetstar capacity expected to hit 120% of pre-covid levels, while Qantas capacity is forecast to reach 107% of pre-covid levels.

Despite the improving outlook, the stock finished out Thursday’s session lower, closing at $5.20 per share.

Other key points from the market update included:

  • Demand for travel within the trans-Tasman bubble has been robust, with 'thousands of bookings made in the first few days'
  • Approximately 90% of the Group's aircraft would be active in Q4, well ahead of the 25% that were active during the COVID-19 trough
  • The airline's premium lounges across Sydney, Melbourne and Brisbane will reopen from April 19 onwards

Strategy Check: The airline noted that its short-term focus would be on cashflow opposed to margins. As a result, it was noted that 'the positive impact on FY21 earnings from […] increased activity will be relatively small.'

'This means even more low fares that will continue to stimulate demand,’ the airline added.

Analysts from Macquarie zeroed in on this strategic focus, saying:

‘Whilst the earnings improvement will lag the domestic capacity recovery, cashflow is being well managed meaning that the surging capacity gives greater certainty on Qantas entering balance sheet repair mode in’ the fourth quarter of fiscal 2021.’

‘For Qantas, we continue to push a re-rating thesis, considering the improving outlook and structural business improvements made through COVID – this will eventually support higher profitability.’

Qantas share price (ASX: QAN)

The stock opened at $5.21 per share on Friday, slightly ahead of Thursday’s close.

Against Macquarie's projections QAN trades on a 9x FY23 earnings multiple, which, it should be noted, is comparable to pre-covid valuations.

The investment bank has an Outperform rating and $6.45 price target on QAN.

Trade Qantas long and short with IG today.

Create an IG trading account or log in to your existing account to get started now.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.