On Wednesday, Citi reinstated coverage on LatAm Airlines Group (NYSE:LTM) stock with a Neutral rating and set a price target of $26.50.
The firm had previously suspended its airline rating. The update follows LatAm Airlines' notable operational and balance sheet improvements. Despite these advancements, Citi maintains that it is difficult to justify a valuation premium for LatAm Airlines compared to its competitor, Copa.
The airline has shown commendable progress in enhancing its operations, which has been acknowledged in the reinstated coverage. This progress includes positive changes in both the day-to-day running of the airline and its financial health.
Citi's analysis suggests that while the airline has made strides in its performance, the market valuation should remain on par with its industry peers.
Citi's neutral outlook is also influenced by the upcoming expiration of a lock-up agreement in late November. This event could potentially lead to a short-term overhang risk on LatAm Airlines' shares.
The expiration of this agreement may allow for the sale of shares that were previously restricted, possibly affecting the stock's stability in the near term.
The price target of $26.50 reflects Citi's assessment of LatAm Airlines' market position following the suspension of its previous rating. This target is indicative of the firm's expectation of the airline's stock performance in the current market context.
LatAm Airlines Group has not provided any comment on the new rating and price target. Shareholders and potential investors are likely to watch closely how the stock responds to the market's reaction to Citi's analysis and the impending lock-up expiration.
InvestingPro Insights
In light of Citi's neutral stance on LatAm Airlines Group (NYSE:LTM), current InvestingPro data provides additional context for investors considering the airline's stock. With a market capitalization of $7.39 billion and a Price/Earnings (P/E) ratio of 12.16, LatAm Airlines is trading at a low earnings multiple, which could be attractive to value investors. This is further supported by a P/E ratio adjusted for the last twelve months as of Q2 2024, which stands at 9.76, indicating potential undervaluation compared to future earnings expectations.
Despite the challenges faced by the airline industry, LatAm Airlines has demonstrated a solid revenue growth of nearly 17% in the last twelve months as of Q2 2024, showing resilience and a capacity for recovery. Moreover, the company's gross profit margin at nearly 25% reflects a healthy level of profitability in its operations.
InvestingPro Tips suggest that while LatAm Airlines is a prominent player in the Passenger Airlines industry, investors should be aware that the stock price has shown significant volatility and has fared poorly over the last month. Nonetheless, analysts predict the company will be profitable this year, which could provide some reassurance amidst the volatility. For those interested in a deeper analysis, InvestingPro offers additional tips on LatAm Airlines, which can be found at https://www.investing.com/pro/LTM.
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