Thursday, July 21, 2016

Air Transport Group At A Comfortable Cruising Altitude

I really can't complain about how Air Transport Group (NASDAQ:ATSG) has worked out - the shares are up about 50% from my last update, with the stock shooting up on confirmation of an extensive long-term deal between the company and Amazon (NASDAQ:AMZN) that will see Amazon become the major leasing partner for this cargo aircraft specialist.

In the "so, what's next?" world that is Wall Street, Air Transport is probably looking at a more sedate remainder of the year in terms of big market-moving news. The company has a lot of work to do to get the Amazon agreement up and running, and that is going to bring start-up costs into the financials that will likely obscure the generally solid results of existing operations with partners like DHL and the growing "other" operations like maintenance. Longer term, though, I would not be surprised to see the Amazon relationship expand further, nor to see the company's Chinese joint venture prove to be an underrated growth opportunity.

As for the shares, I think the Street basically has this one dialed in today. I come up with a fair value range of around $14 to $16.50, so there is some upside (particularly if there would be a faster-than-expected expansion of the Amazon relationship), but it's not a striking bargain like before.

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Air Transport Group At A Comfortable Cruising Altitude

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