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Key Highlights:
- Qantas shares climb to AU$8.77, with a peak of AU$9.05 during the month.
- The airline's stock has surged over 60% since the beginning of 2024, recovering from a low in March.
- Morgan Stanley issues a positive broker note with a $10.50 price target, suggesting further 20% upside.
Qantas Airways Limited (ASX:QAN) saw a strong 8.5% increase in its share price throughout November, closing the month at $8.77. At its peak, the airline’s shares reached a record high of $9.05, marking a significant achievement for the company. This monthly gain builds on a staggering 60% increase since the start of the year, signaling a notable turnaround for Qantas, especially given its stock had fallen to a 52-week low earlier in March.
What Drove the Qantas Share Price Higher in November?
Despite the absence of major company news in November, Qantas experienced a robust share price rally. However, investor optimism may have been sparked by a bullish broker note from Morgan Stanley. Mid-month, Morgan Stanley issued a report upgrading its stance on Qantas, placing an overweight rating on the stock and setting a price target of $10.50. With the current share price at $8.77, this target implies an additional 20% upside for investors over the next year.
Positive Broker Sentiment and Dividends Drive Optimism
Morgan Stanley’s bullish outlook is largely driven by Qantas’ strong customer demand and the potential for lower fuel prices. The broker believes that these favorable conditions, combined with Qantas’ robust market position, make the airline well-poised for further growth. The note mentioned that lower fuel costs have turned into a tailwind for the airline, boosting profitability as consumer demand remains strong.
Further adding to the optimism, Morgan Stanley has forecast a 27-cent per share dividend for FY 2025, offering a 3.1% dividend yield. This dividend is expected to enhance the stock's appeal to income-focused investors, creating a broader base of support for the share price. With this, the total potential return for Qantas investors could reach around 23%, factoring in both price appreciation and the dividend yield. This is a significant potential upside, especially considering the 60% rally the stock has already seen in 2024.
Share Buyback and Future Growth Prospects
In addition to strong demand and fuel savings, Morgan Stanley also highlighted the possibility of Qantas initiating another share buyback program in FY 2025. This would support the stock price by reducing the number of shares in circulation, potentially boosting shareholder value. Despite Qantas’ shares reaching record levels, the broker believes the airline’s strong fundamentals and growth prospects will continue to drive the stock higher.
