Qantas share price: Flying kangaroo braces for turbulence

Qantas (ASX: QAN) share price has staged a strong recovery in the past few weeks as investors bought the dip. After bottoming at $A4.67 in October, the stock has jumped by over 14% to the current A$5.33. Despite the comeback, the shares have crashed by over 28% from the year-to-date high.

Qantas woes remain

Qantas, also known as the flying kangaroo, has moved from being one of the most loved companies in Australia to one of the most hated. The company has made several missteps, which helped push Alan Joyce, the long-serving CEO out a few months ago. 

For example, Qantas was found guilty of laying off 1,700 workers illegally during the COVID-19 pandemic. That ruling will likely attract a big fine in the coming weeks. At the same time, it was accused of selling tickets for canceled flights. 

Qantas customers also complained of slow services and lost bags. As a result, in a recent annual meeting, the company’s shareholders voted against backing salaries of its senior executives.

Still, a bullish case can be made about Qantas. For one, unlike other airlines, it exited the pandemic with a better balance sheet as Alan Joyce focused on cash preservation. 

Further, the new management will be under pressure to improve its services following the recent mishaps. For one, failure to do that will likely see its shareholders vote out the current directors.

Most importantly, while competition has risen over the years, the company still has a strong market share in the industry. It controls about 60% of the domestic market. Historically, companies are usually able to emerge from these public relations challenges.

Also, the company is fighting these battles from a point of strength, helped by its strong balance sheet. The most recent results showed that Qantas business did well in the last financial year as travel rebounded.

Its underlying profits jumped to over $A2.45 billion while its reported one came in at $A1.7 billion. As a result, the management announced a $500 million share buyback program to reward its shareholders.

Qantas faces other challenges that could impact its stock. For one, the cost of doing business is rising as the jet engine prices remain at an elevated level. In a recent statement, the firm said that jet fuel prices had jumped by 30% from May. As a result, if this trend continues, the fuel bill will grow by about $200 million to $2.8 billion. 

Qantas share price forecast

QAN chart by TradingView

The daily chart shows that the QAN stock price has made a strong rebound in the past few weeks as investors bought the dip. It remains below the 100-day Exponential Moving Average (EMA). The recovery has found a resistance slightly above the 61.8% Fibonacci Retracement level.

Therefore, I suspect that shares of the flying kangaroo will have turbulence in the coming weeks. The likely scenario is that it retreats and retests the support at $4.67 and then it resumes the bullish trend.