The ASX200 usually takes its lead from Wall Street, which is being fed by the FED right now like a kid taking candy at a birthday party. But, we are not America, so using them as a reference point is dangerous right now.
Warren Buffet has sold all his airline stocks while QAN is entering Disneyland in terms of its current price. I find (no bias whatsoever), the Goldman Sachs valuations on some stocks to be pretty accurate. When I was a holder at around these prices in 2016, and they recommended it as a BUY, I laughed and thought someone at their office was on meth or something. In the coming months GS eventually pushed their target price all the way to $6.90 and I laughed myself almost into an incarcerated hernia. I sold QAN at about $6 never thinking it would get anywhere near $7....and then it did.
Another thread on this site has asked for current charting / analysis and if you head over there, there's not much being added. The tech team seems to be in hiding.
So, I'd like to try something - see if it makes sense.
Late last year, I sold QAN (again at just over $6) taking a little profit again. I noticed GS had again advised it should run to over $7 and I didn't believe them - that's my bad. But, what cursed me actually saved me because I was considering buying back in at around $6.50, and boy that virus saved me. I closed all my positions in even before it left Wuhan and I count myself wise / lucky to this day.
But, what is QAN actually worth today? This is really important because without a vaccine, every scenario is up for grabs....second wave in Australia over winter?, mutations making a vaccine harder to target it?...you get the picture.
Last year when the world was still normal, QAN was trading as high as $7.40 and Joyce was in the Garden of Eden. Then the virus hit, and the price shed as much as $5.40 in 6 weeks. One hell of a fall.
Now, moving forward, when restrictions are lifted, they won't cram passengers in like sardines again and the airline industry (what's left of it) is talking about "closing the middle seat" which means aircraft will not be able to place passengers next to each other anymore. This means that an aircraft with a 280 seat capacity will be reduced to about 150, but that's only if everyone wishes to fly - which they won't. Early survey data coming out of the US and Europe is indicating that around 30% of people who normally travel, will suspend any movements until a vaccine is available, and that is still months away.
I'm not sure about fuel hedging and whether current contracts can be scrapped with new ones written at these oil prices, but that, and no real competition from Virgin in the short term, are the only tailwinds QAN has right now.
Assuming we take the interim high of about $7.40 and subtract 45% (social distance seating) we get $4.07. Then we need to subtract about 30% for that part of the market (non-freight) that will simply not fly until a proven vaccine is out, and we get $2.84.
Goldman Sachs has revised it price on QAN to $3.03...pretty close.
I really don't want to pay much above that, and if you have, then don't sell by any means because through hell and high water, it will go back up, but you will have to wait.
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