There's An Interesting Gap Between Air Transport's Underlying Performance And The Share Price

It’s been a frustrating run for Air Transport Group (NASDAQ:ATSG) since my last update on the company. While e-commerce has been red-hot, the company’s diversification toward more passenger and military worked against the company, arguably contributing to underperformance relative to customers like Deutsche Post DHL (OTCPK:DPSGY) and UPS (UPS), rivals like Atlas Air (AAWW), and the broader freight/logistics space.

I don’t believe there is anything wrong with Air Transport’s business, and if anything the outlook is stronger, given fully booked fleet additions in 2021 and customers already discussing plane availability as far out as 2025. Moreover, Amazon (AMZN) remains a committed partner, recently exercising warrants to take its stake to 19.5% and sending a little cash back to Air Transport (a cash exercise on a large chunk of warrants).

This is always a challenging business to model, in no small part due to the fact that capex decisions are tough to model beyond a year or two out. In any case, I don’t expect any meaningful slowdown in e-commerce, nor do I expect any particularly compelling challenger to emerge to Air Transport’s fleet of converted 767s. With a fair value in the low-to-mid $30’s, I think this is a name worth some consideration.

 

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There's An Interesting Gap Between Air Transport's Underlying Performance And The Share Price