QAN: Share Price Pullback And Upgrade Are Expected To Support Upside

Analysts have slightly trimmed their average Qantas Airways price target from A$12.17 to A$12.13. They continue to highlight an upgraded Outperform view, which they attribute mainly to recent share price weakness.

Analyst Commentary

Recent research points to valuation as the main driver behind the upgraded view on Qantas Airways, with the share price pullback bringing the stock closer to levels some see as more reasonable relative to their price targets.

Bullish Takeaways

Bullish analysts see the 20% share price pullback as creating a more attractive entry point, with the new A$11.25 target still implying upside from recent trading levels cited in their work.
The upgrade to an Outperform stance signals increased confidence that current pricing reflects many known risks, shifting the focus back to potential execution and earnings delivery.
Supporters of the bullish view argue that, at this level, the risk or reward trade off looks more balanced for long term holders compared with when the stock was closer to the prior A$12 target.
The modest trim in the price target from A$12 to A$11.25 is framed as a refinement rather than a thesis change, with the main message being that valuation now better aligns with analysts’ expectations.

Bearish Takeaways

Even with the upgrade, the cut in the price target from A$12 to A$11.25 signals that some previous expectations around potential upside have been tempered.
Cautious analysts may point out that the reduced target suggests limited headroom if execution or external conditions do not align with current assumptions.
The focus on valuation after a 20% pullback indicates that the recent share price performance has been a key driver of the revised stance, which can leave less margin for error if sentiment weakens again.
Some investors might view the combination of a lower target and upgraded rating as mixed messaging, and may prefer clearer evidence of operational progress before committing new capital.

What's in the News

Qantas has agreed to settle a class action over Covid era flight credits for $105 million, subject to Federal Court approval, with no admission of liability and an increase in the existing provision to be recognised outside underlying earnings in the second half of Fiscal Year 2026 (Key Developments).
The settlement covers flights scheduled between January 1, 2020 and November 1, 2022 that were cancelled by Qantas, and follows the removal of expiry dates on Covid flight credits, allowing customers to request cash refunds indefinitely (Key Developments).
The Board has authorised a share buyback plan, alongside a separate share repurchase program of up to A$150 million, running until December 31, 2026, with 1,513,199,279 shares on issue as of February 26, 2026 (Key Developments).
Qantas has declared a fully franked ordinary dividend of A$0.198 per share for the six months to December 31, 2025, payable on April 15, 2026, with a record date of March 11, 2026 and ex date of March 10, 2026 (Key Developments).

Valuation Changes

Fair Value: A$12.17 has edged down slightly to A$12.13, reflecting a modest refinement in the model output.
Discount Rate: The discount rate has moved from 8.83% to 8.79%, indicating a small adjustment in the risk or return assumptions used in the analysis.
Revenue Growth: Assumed annual A$ revenue growth has shifted from 5.81% to 5.87%, a slight upward tweak to the top line outlook embedded in the valuation inputs.
Net Profit Margin: The projected net profit margin has moved from 7.41% to 7.44%, indicating a very small change in expected profitability levels.
Future P/E: The future P/E multiple has been trimmed from 11.06x to 10.95x, a minor reduction in the valuation multiple applied to expected earnings.

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Key Takeaways

Fleet renewal and dual brand strategy aim to enhance operational efficiencies and capture demand, supporting future growth in margins and earnings.
Investments in customer experience and loyalty programs focus on boosting brand loyalty and sustaining high-margin revenue growth.
Fleet renewal, legislative costs, currency fluctuations, delivery delays, and competitive pressures challenge Qantas's margins and growth unless proactive strategies mitigate impacts.

Catalysts

About Qantas Airways

Provides air transportation services in Australia and internationally.What are the underlying business or industry changes driving this perspective?

Fleet renewal is expected to accelerate, with 18 new aircraft this year and 21 next year, unlocking EBIT benefits and driving future growth through operational efficiencies and increased capacity. This will likely have a positive impact on net margins and earnings as new aircraft improve cost structures.
Increased investment in customer experience and satisfaction, such as improvements in Net Promoter Scores and investments in travel experience, are expected to drive future revenue growth by enhancing brand loyalty and customer retention.
The dual brand strategy with Qantas and Jetstar is well positioned to capture strong travel demand across both premium and low-fare markets, expected to boost revenue and maintain high load factors, which is critical for sustaining high operating margins.
The Qantas Loyalty program's expansion and investment in new products like Classic Plus are likely to increase member engagement and points earning rates, supporting revenue growth from high-margin loyalty partnerships and offerings.
Strong operating cash flow and the reinstatement of a base dividend indicate robust financial health, with plans for disciplined capital allocation towards fleet renewal and shareholder returns, positioning the company for sustainable earnings growth and value creation.

Qantas Airways Earnings and Revenue Growth

Qantas Airways Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Qantas Airways's revenue will grow by 5.9% annually over the next 3 years.
Analysts assume that profit margins will increase from 6.5% today to 7.4% in 3 years time.
Analysts expect earnings to reach A$2.2 billion (and earnings per share of A$1.45) by about April 2029, up from A$1.6 billion today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as A$2.4 billion.
In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 11.0x on those 2029 earnings, up from 7.9x today. This future PE is greater than the current PE for the AU Airlines industry at 7.9x.
Analysts expect the number of shares outstanding to grow by 0.2% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.79%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

Ongoing fleet renewal introduces significant entry into service costs, potentially impacting net margins until the efficiencies and benefits are fully realized.
The Same Job Same Pay legislation is expected to increase costs for the group, which could affect net margins if not offset by transformation initiatives.
Currency fluctuations, particularly the decline in the Australian dollar against the U.S. dollar, could increase fuel costs, impacting net margins if hedging strategies are insufficient.
Minor delays in aircraft delivery from suppliers like Airbus may affect capacity planning and the realization of anticipated transformation benefits, potentially impacting revenue growth and earnings.
Increasing international competition, particularly in the European markets, could affect pricing power and pressure international earnings if the Qantas group's differentiated strategy does not successfully mitigate these challenges.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of A$12.13 for Qantas Airways based on their expectations of its future earnings growth, profit margins and other risk factors.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$13.5, and the most bearish reporting a price target of just A$10.0.
In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be A$29.2 billion, earnings will come to A$2.2 billion, and it would be trading on a PE ratio of 11.0x, assuming you use a discount rate of 8.8%.
Given the current share price of A$8.55, the analyst price target of A$12.13 is 29.5% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Fleet Renewal And Dual Brand Strategy Will Strengthen Future Market Position