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Here’s why Goldman Sachs has Qantas on its ‘conviction buy’ list

Tom Richardson

On May 28 the analysts at Goldman Sachs updated their views on the airports and airlines sector across the S&P/ ASX200 (ASX: XJO) and concluded one business is a particularly attractive buy.

It likes national carrier Qantas Airways Limited (ASX: QAN), as a buy ahead of other travel players such as Sydney Airport Holdings Ltd (ASX: SYD) and Virgin Australia Holdings Ltd (ASX: VAH).

“We believe Qantas, as the most profitable and best-funded carrier in the region, is best-placed to extend its dominant market position in what has become a more challenging operating environment for its rivals to compete.” commented the analysts in a May 28 research note.

Airline carriers have a mixed reputation as long-term investments due to the competitive nature of the industry, capital expenditure requirements, and high-fixed costs. For example even if passenger loads turn down the airlines cannot lay off pilots from flights or adjust landing fees, while rising oil prices can also send their costs rocketing.

Goldmans has a $6.74 share price target on Qantas, which means it has plenty of upside from today’s price of $5.49 if it’s on the money.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019