Investing in airline stocks can be a thrilling ride, and Qantas Airways Ltd (ASX: QAN) is no exception. As we look ahead to 2025, the question on many investors' minds is: How much could a $1,000 investment in Qantas be worth by then? Let's dive into the details, examining both the current landscape and future forecasts for the flying kangaroo.

Qantas Stock Performance in 2024

Qantas shares have experienced a mixed performance throughout 2024. Early in the year, the stock surged, reflecting optimism in the airline's post-pandemic recovery. However, since May, Qantas shares have been trading sideways, showing limited momentum in the latter half of the year. As of the latest data, Qantas shares are trading at $6.03, down over 1% in the past month.

Despite this, Qantas trades at a price-to-earnings (P/E) ratio of 6.6 times, which is significantly lower than the broader market average of around 18 times. This lower P/E ratio suggests that Qantas shares may be undervalued compared to the broader market.

Analyst Forecasts: A Bullish Outlook

Analysts are generally optimistic about Qantas' prospects. According to CommSec, the consensus among analysts is to rate Qantas as a 'buy.' A key driver behind this optimism is Qantas' robust cost-cutting measures. The airline recently implemented a cost reduction programme aimed at slashing over $1 billion in ex-fuel operating costs by FY24. This initiative has already resulted in permanent cost benefits, enhancing the airline's profitability.

Goldman Sachs, in particular, has highlighted Qantas as a stock with significant upside potential. The investment bank noted that Qantas is currently trading at a P/E of 6.4 times FY25 earnings, which represents a 29% discount compared to its regional and US airline peers. 

Historically, Qantas has traded at a 14% discount, indicating that the current valuation may be overly pessimistic.

Projecting the Value of a $1,000 Investment

Let's get into the numbers and see how much a $1,000 investment in Qantas shares could be worth by 2025, based on Goldman Sachs' forecasts.

At the current share price of $6.03, a $1,000 investment would purchase approximately 165 shares. Goldman Sachs has set a price target of $8.05 for Qantas, which suggests a potential 33.5% return over the next 12 months. If this price target is met, your $1,000 investment could grow to $1,335 by 2025, excluding any dividends.

But that’s not all. Goldman Sachs also expects Qantas to reinstate its dividend in FY25, predicting a payout of 30 cents per share. At the current share price, this dividend would offer a yield of around 5%. For an investor holding 165 shares, this could translate to an additional $49.75 in dividend income, bringing the total potential return to $1,384.75.

Qantas' FY24 Performance and Future Prospects

Qantas’ financial performance in FY24 is a crucial factor in determining the stock's future value. According to Goldman Sachs, Qantas is expected to report revenue of $22,131.1 million in FY24, up 11.7% year-on-year. Nevertheless, a 17.7% increase in the cost of goods sold offsets some of this revenue growth, resulting in lower earnings than in FY23. 

The broker has forecasted EBITDA of $4,036.4 million, pre-tax profit of $2,001.5 million, and net profit before one-offs of $1,412.1 million. These figures represent declines of 9.2%, 18.8%, and 18.8%, respectively, compared to FY23. Despite these challenges, Goldman Sachs remains optimistic, noting that the market may be undervaluing Qantas' improved earnings capacity.

Should you invest?

So, is Qantas a good investment? According to Goldman Sachs, the answer is a resounding yes. The broker currently has a 'buy' rating on Qantas, with a price target of $8.05. This implies a potential upside of 30% over the next 12 months.

Goldman Sachs believes that the market is underestimating Qantas' structurally stronger earnings, driven by its successful cost-cutting programme and ongoing customer investment. The broker expects Qantas to deliver earnings sustainably above pre-COVID levels and to distribute capital to shareholders while renewing its fleet.

Moreover, Qantas is trading at a significant discount compared to its historical averages and peers. This discount presents a potential buying opportunity for investors who believe in Qantas' long-term growth story.

A $1,000 investment in Qantas shares today could potentially be worth $1,384.75 by 2025, according to Goldman Sachs' forecasts. This projection is based on a combination of share price appreciation and anticipated dividend payments. While the airline industry remains volatile, Qantas' strong cost management and improved earnings capacity make it a compelling investment opportunity.

As always, it's important to consider your own risk tolerance and investment goals before making any investment decisions. However, for those looking to add quality stock to their portfolio, Qantas appears to be a promising candidate for 2025 and beyond.