On Friday, Auckland Airport (AIA:NZ) (OTC: ACKDF) received a stock rating upgrade by UBS from Sell to Neutral, with a revised price target set at AUD7.95, up from the previous target of AUD7.75.
The adjustment comes as the company sees reduced uncertainty following a draft pricing review and its guidance for fiscal year 2025, which presents a grounded passenger volume forecast.
The Commerce Commission's draft review of the PSE4 aeronautical pricing has played a significant role in this reassessment. According to UBS, this review and the company's realistic outlook on passenger numbers have helped diminish the previously noted uncertainties. The firm also cited valuation support for Auckland Airport, noting a decrease in interest rates and a re-rating among industry peers.
Looking forward to fiscal year 2028, UBS pointed out that Auckland Airport is expected to benefit from increased aeronautical charges during the PSE5 period. This potential for additional revenue has affected the improved stock rating and price target.
However, UBS has identified a potential concern for investors, highlighting that organic value growth for Auckland Airport may be limited leading up to fiscal year 2028.
The firm anticipates subdued passenger volumes until then, followed by the necessity to reset aeronautical charges in fiscal year 2026, which could impact financial performance.
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