Through the third week of July, my March call to not worry too much about the problems Copa Holdings (NYSE:CPA)
was facing in Venezuela seemed like a good one - the shares were up 25%
as the company continued to enjoy 20%-plus earnings growth on strong
capacity growth and firm pricing. Unfortunately, Copa's second quarter
report sourced investors on the shares as management increased its
capacity reduction plans for Venezuela and lowered margin guidance as a
result, leading to flat net performance relative to my last article.
I'm not sure why the guidance reduction was such a surprise. Avianca (NYSE:AVH) and Gol Linhas (NYSE:GOL)
had been reducing exposure to Venezuela and Copa management indicated
in May that they'd follow suit, and it was (or should have been)
well-known that Venezuela was an uncommonly profitable market for Copa.
Copa's update for July trends was not positive, though, and it is going
to take some time to work past the Venezuela impact and reassure the
Street that this is still a very profitable airline.
I believe
Copa is still a good airline, a good growth story, and a good name to
own for international diversification. GOL is probably an easier name to
own right now (and undervalued in its own right), but I still see solid
opportunity at Copa. Even I take a pretty conservative cut to my
earlier numbers, I come up with a fair value of close to $140 and
$150-plus is not that hard to support.
Read more here:
Copa Holdings Seeing Turbulence, But Still A Top-Notch Airline
No comments:
Post a Comment