Qantas share price slides as legal woes mount: buy the dip?

Follow Invezz on Telegram, Twitter, and Google News for instant updates >

Qantas (ASX: QAN) share price dropped to the lowest level since November 2022 as the company came under regulatory scrutiny. The stock retreated to a low of A$5.77 on Thursday, ~16.7% below the highest level this year.

Qantas is having a good year as the travel industry bounces back. Like other airlines, the company has seen more demand this year. As we have written before, companies like IAG, Delta Airlines, and Southwest, published strong results and profits.

Qantas published strong financial results in August. The results showed that the underlying profit before tax rose to over $2.47 billion while its statutory profit after tax rose to $1.74 billion.

As a result, the company announced a major share repurchase program worth $500 million. Share buybacks are important because they reduce the number of outstanding shares and boost the earnings per share (EPS).

Most importantly, Qantas continued to reward its customers and workers. It set aside $340 million to reward its 21k employees.

However, the company is now facing substantial pressure from regulators. In a statement, the regulator sued the company for engaging in false, misleading and deceptive conduct by selling tickets for thousands of flights it had canceled.

If Qantas is found guilty, the company could be forced to pay hundreds of millions of dollars. And in an opinion piece, AFR noted that the company had lost Australia’s trust and that it would need to spend more money.

Qantas has also been in the spotlight after the Albanese government blocked Qantas Airways’ bid for more flights. Still, Qantas will continue to benefit as demand for airlines continues.

The daily chart shows that Qantas stock price has been in a bearish trend in the past few days. By dropping by 17% from the year-to-date high, the stock is nearing its bear market. The shares have moved below the 38.2% Fibonacci Retracement level.

It has also fallen below the 50-day and 200-day exponential moving averages (EMA). The two lines are about to form a death cross, which happens when the two lines make a bearish crossover.

Further, the stock has dropped below the important support at $5.96, the lowest level on June 27th and February 23rd. Therefore, from a technical standpoint, the shares will likely continue falling as sellers target the 50% retracement level at $5.57. This price is ~5.7% below the current level.

Copy expert traders easily with eToro. Invest in stocks like Tesla & Apple. Instantly trade ETFs like FTSE 100 & S&P 500. Sign-up in minutes.

77% of retail CFD accounts lose money.