In a report released yesterday, Frank Galanti from Stifel Nicolaus downgraded FTAI Aviation (FTAI – Research Report) to a Hold, with a price target of $123.00.
Frank Galanti has given his Hold rating due to a combination of factors affecting FTAI Aviation. The company recently experienced a rebound following a short attack, which has brought attention to the sustainability of its aerospace margins. Although FTAI is expected to continue selling engines and potentially exceed guidance, the pressure on margins remains a concern, particularly if no new PMA parts are approved this year. The lack of detailed information about the segment composition also makes it challenging to accurately value the business, leading to a cautious approach in recommending the stock.
Additionally, while the Strategic Capital Initiative (SCI) has positively impacted the valuation, it is not sufficient to warrant a Buy rating. FTAI’s involvement in a joint venture to invest in mid-life planes is expected to generate significant EBITDA, but these estimates are sensitive to assumptions and offset by the sale of planes, resulting in a substantial loss of value. Despite the potential for future growth and improved fundamentals, uncertainties around margin sustainability and valuation concerns have led to the decision to maintain a Hold rating.