Why exactly one would buy into airlines remains a bit of a mystery, but for institutions focusing on the big stocks it is hard to avoid trading Qantas to some extent. Deutsche has a buy on the stock, citing potential growth in Jetstar and Qantas’ frequent flyer points business. They might as well point to a wing and tail and admire the flaps. The potential damage to Qantas’ brand from the industrial disputes is not mentioned, because it does nto impinge on what really matters: capital allocation:
With the recent industrial dispute in arbitration we are of the view that Fair Work Australia is unlikely to impose restrictions on matters of business strategy or capital investment, we retain our BUY recommendation based on 25% upside to our $2.00/share Price Target.
Yep, don’t worry about those disgruntled staff and customers. Strategy and capital allocation is all that matters (how Fair Work Australia could ever have en effect on such things also remains a mystery).
Macquarie has an outperform rating and a modest price target of $1.98. Macquarie is saying that the time frame for the Asian regional play is being pushed out and considers the stock to be cheap:
Modest growth outlook for maturing Australian market. The bulk of QAN’s profitability is generated domestically through the leveraging of its two brands – near term regional prospects provide revenue growth opportunities but interestingly management expectations for medium term growth at ~4% appear below that forecast by Airbus for the region at 5%. Clearly the focus remains on how QAN can best participate in the stronger growth prospects to, from and within Asia through its two brands, although the path on the low cost carrier front appears far better defined at this point.
The earnings multiples in 2013 look pretty cheap (7 trimes), but that is a long way off and there’s no dividend yield. Probably best to remember that when the words Macquarie and Qantas are uttered in the same sentence, it usually means it’s time to disembark.