On Tuesday, TD Cowen showed confidence in Volaris (NYSE: VLRS) as it increased its stock price target for the airline's stock to $13.00 from $10.00. The firm maintained a Buy rating, signaling its positive outlook on the company's shares. The adjustment follows Volaris' report of robust traffic numbers for the September quarter.
The company is scheduled to reveal its third-quarter earnings after the market closes on October 22, with a conference call planned for the next morning at 11:00 AM ET. Management highlighted that both domestic and international markets saw strong demand during the quarter. This period also marks a year since the airline started to recover from the operational challenges caused by the grounding of planes due to issues with GTF engines.
The analyst's note underscored the airline's resilience and improving performance, stating, "We update our estimates to incorporate Volaris' September quarter traffic." The positive trends in traffic were a key factor in the decision to reiterate the Buy rating and the price target hike to $13.00 per share. The recommendation indicates a continued bullish stance on Volaris' market position and financial outlook.
In other recent news, Mexico-based low-cost airline, Volaris, reported record EBITDAR for Q2 2024, despite facing operational challenges, including a 17% capacity reduction due to expedited engine inspections.
This achievement was accompanied by a slight 7% decrease in total operating revenues, which stood at $726 million, and a 29% increase in EBIT to $66 million. The company has maintained a solid liquidity position of $758 million and a net debt to EBITDAR ratio of 2.9 times.
Volaris' management has expressed a cautious optimism, planning to prioritize profitability over market share. The company is also shifting its network focus to the US, with a goal to increase dollar revenue to 65% by year-end. For Q3, Volaris anticipates a 14% year-over-year ASM reduction, with TRASM around $0.093 and CASM ex-fuel approximately $0.056.
Despite a reduction in capacity, Volaris' financial performance remained resilient, with only a minor decrease in revenues. The strategic shift towards profitability, improved customer service, and increased US dollar revenue is expected to help the company navigate through macroeconomic volatility. These are among the recent developments in Volaris' operational and financial landscape.
InvestingPro Insights
Complementing TD Cowen's optimistic outlook on Volaris (NYSE: VLRS), recent data from InvestingPro provides additional context to the airline's financial performance. The company's P/E ratio of 6.95 suggests that it's trading at a relatively low earnings multiple, which could be attractive to value investors. This aligns with one of the InvestingPro Tips indicating that Volaris is "Trading at a low earnings multiple."
Moreover, Volaris has demonstrated strong recent performance, with InvestingPro data showing a 1-month price total return of 8.84% and a 3-month return of 11.96%. These figures support the InvestingPro Tips highlighting "Strong return over the last month" and "Strong return over the last three months," which may contribute to the positive sentiment expressed in TD Cowen's analysis.
It is worth noting that analysts predict the company will be profitable this year, as indicated by another InvestingPro Tip. This expectation aligns with the company's reported profitability over the last twelve months and could further justify TD Cowen's increased price target.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Volaris, providing a deeper understanding of the company's financial health and market position.
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