Tuesday, September 9, 2014

Seeking Alpha: Copa Holdings Seeing Turbulence, But Still A Top-Notch Airline

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

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