On Wednesday, HSBC (LON:HSBA) analyst raised the price target for Fraport AG Frankfurt Airport Services Worldwide (FRA:GR) (OTC: FPRUF) to €66.00, up from the previous €61.00, while keeping a Buy rating on the stock. The adjustment reflects the company's performance in 2023 and an anticipated tariff increase at Frankfurt Airport.
The revised price target comes after the analyst's evaluation of Fraport's 2023 results and the forecasted tariff hike in Frankfurt. The tariffs are expected to rise by 5% in 2025, compared to a previous estimate of 3%, and by 3.2% annually from 2026 to 2030, an increase from the 1% annual rise previously projected. These changes have led to an upward revision in EBITDA forecasts, with an increase of 5% for 2024 and 13% by 2030.
The valuation of Fraport continues to be based on a sum-of-the-parts (SOTP) model. Most of the airports operated by Fraport around the world are assessed using discounted cash flow (DCF) models. This valuation methodology has resulted in setting the new target price at €66 per share, suggesting a close to 47% potential increase from the current share price.
HSBC's analysis indicates confidence in Fraport's financial outlook and growth potential. The firm reiterates its Buy rating, signaling an optimistic view on the stock's future performance. The anticipated tariff increases and the positive adjustments to future EBITDA estimates have been pivotal in establishing the new price target for Fraport AG.
InvestingPro Insights
Amidst the optimistic outlook from HSBC analysts, Fraport AG's financial health and stock performance metrics offer additional context for investors. According to real-time data from InvestingPro, Fraport AG is navigating through a period of volatility with a P/E Ratio of 10.66 and an adjusted P/E Ratio for the last twelve months as of Q4 2023 of 11.23. These figures suggest that the company's earnings are priced at a moderate level relative to the market, which could be attractive to value-oriented investors.
Moreover, the company's revenue growth has been robust, with an increase of 25.25% over the last twelve months as of Q4 2023. This growth trajectory is further underscored by a quarterly revenue growth of 18.0% in Q4 2023, reflecting the company's capacity to expand its financial base amidst changing market conditions.
InvestingPro Tips highlight two pertinent aspects of Fraport AG's current situation. Firstly, the company operates with a significant debt burden, which investors should consider when evaluating the stock's risk profile. Secondly, Fraport AG's stock price movements have been quite volatile, which might appeal to traders looking for short-term opportunities but could also imply a higher risk for long-term investors.
For those seeking a deeper dive into Fraport AG's financials and stock performance, InvestingPro offers additional insights. Currently, there are 6 more InvestingPro Tips available, which can be accessed by visiting: https://www.investing.com/pro/FRA. These tips could provide further guidance on the potential risks and rewards associated with Fraport AG's stock. To enhance your investing strategy with these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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