In a report released today, Tabitha Foo from DBS maintained a Hold rating on AIR France KLM (0LN7 – Research Report), with a price target of €11.50.
Tabitha Foo’s rating is based on a combination of factors that reflect both the strengths and challenges faced by Air France KLM. The airline has shown a strong performance in the fourth quarter of 2024, exceeding profit expectations due to favorable margins and increased passenger load. The company’s revenue growth is supported by higher yields and the expansion of Transavia’s ancillary services. Additionally, the management’s optimistic profit guidance for 2025, which anticipates significant improvements, hinges on maintaining pricing resilience and cost discipline despite rising taxes.
However, Foo also highlights several challenges that justify the Hold rating. The company faces ongoing cost pressures and geopolitical disruptions that could impact profitability, with a delay in EPS normalization expected until the fiscal year 2025. While the balance sheet has improved, reducing net debt significantly, the potential for shareholder returns remains uncertain, especially when compared to peers. Furthermore, macroeconomic weaknesses and geopolitical tensions could dampen travel spending, and persistent cost inflation along with airport capacity constraints could further hinder growth. These factors contribute to a cautious outlook, warranting a Hold recommendation with a target price of EUR11.50.
Foo covers the Industrials sector, focusing on stocks such as United Airlines Holdings, Delta Air Lines, and Qantas Airways Limited. According to TipRanks, Foo has an average return of 9.5% and a 56.72% success rate on recommended stocks.
In another report released yesterday, Bernstein also downgraded the stock to a Hold with a €11.50 price target.
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