Morgan Stanley assesses, while some early demand indicators for FY20 are subdued, there is more confidence the downside risks are captured and there is limited near-term impact from volatility in the oil price.
While oil is a risk, the company is fully hedged for FY20. Qantas has guided to a worst-case fuel bill of -$4.1bn.
Loyalty growth, meanwhile, has accelerated and this has become increasingly separate from the vagaries of the airline industry.
Morgan Stanley now explicitly accounts for loyalty in its valuation and upgrades to Overweight from Equal-weight. Target is raised to $7.00 from $5.90.
Target price is $7.00.Current Price is $6.47. Difference: $0.53 – (brackets indicate current price is over target). If QAN meets the Morgan Stanley target it will return approximately 8% (excluding dividends, fees and charges – negative figures indicate an expected loss).