Air New Zealand Stock Still Lacks Appeal

2025-02-25 05:24:08 ET

Summary

• Air New Zealand's declining earnings and rising costs led to a sell rating last year. Despite that, the stock price saw a 19% increase.
• Revenues declined to NZD 3.4 billion due to lower passenger revenues, partially offset by higher cargo revenues and lower fuel prices.
• Grounded airplanes pose a significant risk, while reactivating them could erode unit revenues; EBITDA recovery is not expected until 2027.
• The investment case remains unattractive with limited upside and expected negative free cash flow, despite a price target of $2.15 for the ANZLY ticker.

I marked Air New Zealand ( ANZLY ) a sell in September 2024. This was driven by declining earnings on rising costs. The stock price, however, rose 19% compared to a 7% return for the S&P 500. This is puzzling for more than one reason....

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