Even in the context of the dire and uncertain circumstances created by COVID-19, I thought Copa (CPA) was too cheap back in May, and the shares have since jumped more than 40%. Although Copa has seen a slower/longer path back to resuming operations, the company's cost-reduction/cash-preservation steps are working and management is being responsible with respect to capital and the company's long-term future.
Obviously, there are still significant operational uncertainties here - the primary one being whether the government of Panama will open the country and allow the company to restart operations in early September. The "good news" is that Copa could survive a shutdown through 2021, and I do believe that air travel will snap back relatively quickly, particularly given Copa's leverage to business travel. With Copa still priced to generate double-digit annualized returns to shareholders (with an elevated discount rate), I don't believe it's too late to own this name.
Read the full article here:
Copa Shut Down For Now, But Offers Upside On The Eventual Rebound
No comments:
Post a Comment