Originally Posted by
BlackPeter
The calm before the storm? No - The calm before more calm. VIX on the NYSE hit its lowest ever point yesterday indicating a total lack of fear in the market
So what do you want the people who contributed to this "deluge of negativism" you described to do? Put ash on their foreheads because the market didn't follow in the short term their view of AIR's value? LOL If you want to, bottom line the collapse you called for hasn't happened and isn't looking likely to happen anytime soon
I was one of the people who said that they see AIR as a good but cyclical company rather at its peak than at its bottom and therefore midterm rather going down than up, and I am still doubtful about the midterm outlook of tourism and the travel industry. In my view just too many indicators point currently towards a cyclical peak scenario. I think IATA know better than you and I and according to them they see global airline travel continuing to grow at 5-6% for the foreseeable future
How likely is oil to keep staying as low as it currently is?No idea but AIR are well positioned with one of the youngest and most fuel efficient fleets in the industry. Besides that fuel prices and yield are inextricably linked so if oil goes up to around $70 barrel AIR could actually be better positioned than at the current level as they'll be able to leverage the efficiency of their fleet better
How likely that increasing competition does not further reduce margins for all players?AIR management were very confident at the last conference call that yields had bottomed based on the full on intensity of all the new entrants and saw increasing yields this period and further out. I am confident they know the industry better than you or I
How likely that tourists keep ignoring the deteriorating NZ environment and the increasing NZ prices? We're one of the for safest places or earth to visit according to a recent survey. The environment is still one of the cleanest in the world, go and have a look at the clarity of Lake Whakatipu in Queenstown for yourself if you don't believe me. The bitter taste of poor quality is remembered long after the thrill of a bargain. I remain confident tourists get a quality tourist experience for the money
How likely that another big terror event like 9/11, a volcano eruption, a war in SEA or a growing war in the Middle East might impact on tourist streams?See comment of safety above. Lots of people are currently reluctant to travel to Europe or America or the middle East for obvious reasons. In the troubled world N.Z. looks better and better with each passing day.
However - this does not exclude the stock price to keep climbing (for some time to come). Remember - markets are in the short term like a voting machine in a popularity contest, only long term are they weighing value and correctly assess risks.Teflon John's appointment is a shot of confidence for the market in the company, it is what it is, a vote by a well respected former leader that he believes in the brand.
If we look at AIR at the current price with a predicted forward PE of 8.8 and a predicted forward CAGR of 3.6 (though backward CAGR only 1.2), than they still appear to be reasonably priced (though not cheap) if we assume that things will continue as nicely as they did over the last 7 years or so. Question is just ... how often in the past have we seen linear growth over long periods in this industry?I am forecasting EPS of 32 cps, average analyst forecast is 31 cps. Puts them on a forward PE of 8.44 using my forecast. The average PE over the last 11 years is apparently 11.
Has it ever crossed you mid that within the normal cycle AIR might be growing earnings during the ongoing development of the company ? They keep adding modern really efficient planes.
Right, i.e. if history is any guide, than a downturn is over the next couple of years much more likely than a continuation of this climb. So, I guess it is just balancing risks vs. opportunities. The optimist keeps focussing on the (diminishing, but still good looking) predicted returns, the realist accepts that the likelihood of a downturn is increasing by the day. Interesting to note that psychology knows about the "optimism bias", but I never heard about a "realism bias".Growth is happening in the travel sector generally driven off the ever decreasing cost of flights in real terms and an expanding middle class in Asia and many other parts of the world. Barring another 9/11 type event I don't see this changing in the foreseeable future
Anyway - all the best with your investment, but if I would still hold, I'd currently see this as a good time to sell ...