Originally Posted by
Roger
Some people will always look at the glass half empty. We've had a record profit since March and it looks set to be even double the FY15 result this year so chart's going back to March are not especially relevant but to the glass half empty brigade it wouldn't matter if AIR made $600m before tax this half and $1.3 billion for the full year...they'd simply say that all the star's aligned once only for AIR and profit will normalise quickly thereafter. One of the major brokers has taken this approach and currently has a reduce rating on AIR with a target price of only $2.50. They think aviation fuel costs will ramp quickly back to normal next year but curiously seem to think the world's airlines won't try and recover any of this extra cost through fuel surcharges or general airfare increases so appear to assume the current slightly lower yields remain unchanged. Warren Buffett doesn't like airlines and neither did Gordon Gekko and besides that they pollute the environment so must by default be a sin stock right ? Consensus broker valuation is $3.03 so anyone fortunate enough to get any at $2.75, (I wasn't today), has about a 10% margin of safety based on consensus valuation which is heavily skewed by one major house that's had a jaundiced view on AIR for quite some time now, (read, they've been wrong for quite some time now).
Craigs are on the money I reckon with their conviction buy rating and $3.40 valuation, (lowest PE ever for AIR of only 4.8 and this in economic conditions that could hardly be described as rosy) and even that assumes oil ramps quickly back up...but does it ?..maybe many of the commodities stay lower for a lot longer.
I guess people could wait for it to go down to $2.40 again before looking to top up or get in but I for one won't be holding my breath for that to happen.