On Wednesday, Citi adjusted its stance on Volaris (NYSE: VLRS), an ultra-low-cost carrier based in Mexico, by reducing the stock's price target. The new target is set at $11.25, a decrease from the previous figure of $14.00. Despite the lower price target, the firm maintains a Buy rating on the airline's shares.
The revision of the price target by Citi reflects several forecast adjustments for Volaris. The analyst cites a marginal decrease in the expected growth of available seat miles (ASM), a key airline industry metric. Additionally, there are slight foreign exchange-driven reductions in passenger yield forecasts, which measure average revenue per passenger, per mile flown.
Citi also notes that the expected fluctuations in non-cash, non-operational items have been incorporated into their model, influencing the revised outlook. These items typically include adjustments that do not affect the company's actual cash flow or operational performance but can impact reported earnings.
The firm's second-quarter earnings per American depositary share (EPADS) forecast for Volaris has been slightly reduced from $0.13 to $0.11. Furthermore, Citi has updated its full-year EPADS estimates for the airline. The new projections are $1.21 for this year, $1.63 for the following year, and $1.82 for 2026. These figures have been adjusted from the previous estimates of $1.23, $1.47, and $1.61, respectively.
InvestingPro Insights
As Volaris (NYSE: VLRS) adapts to the evolving landscape of the airline industry, the latest data from InvestingPro provides a snapshot of the company's current financial health. With a market capitalization of $760.22 million, Volaris is trading at an earnings multiple of 6.82, reflecting a valuation that might appeal to value-oriented investors. The company's price-to-earnings (P/E) ratio has remained steady in the last twelve months as of Q1 2024, standing at 6.75.
InvestingPro Tips indicate that Volaris is expected to experience net income growth this year, a factor that could reinforce Citi's decision to maintain a Buy rating despite a reduced price target. Additionally, the airline is trading at a low earnings multiple, which might suggest that the stock is undervalued relative to its earnings capacity. Notably, analysts have also flagged concerns about a potential sales decline in the current year, a point that aligns with Citi's observation of decreased passenger yield forecasts.
For investors interested in a deeper analysis, there are additional InvestingPro Tips available, offering a comprehensive view of Volaris's financial and operational performance. To explore these insights and enhance your investment strategy, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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