Even after shares in the Brazilian airline Azul SA leaped 34% year to date, many investors are still underestimating the company’s earnings potential as domestic demand rebounds and ticket prices increase, according to analysts at Itau BBA and Raymond James.
Azul posted its best first half of a year since its initial public offering in 2018 amid lower fuel prices, a pickup in demand for its regional routes and a recent debt restructuring plan. The company was founded by David Neeleman, who has started several commercial airlines, including JetBlue Airways in the US.
Within the sector, Azul stands out based on its ability to offer routes to smaller markets where it has little to no competition. At the same time, a debt restructuring finalized in the last month prompted Moody’s Investors Service Inc. to raise its credit grade one notch to Caa1, while revising its outlook to positive from negative.
What’s more, regional competitor Gol Linhas Aereas Inteligentes has been in free fall after it sold almost 2 billion of warrants in early August, triggering a downgrade from Citi.
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