The positive thesis for Azul (AZUL4) shares gained strength among market analysts after the judicial recovery of Gol (GOLL4) in the USA, as the company could gain ground with a possible weakness or reduction in the airline’s operations amid to the process. However, AZUL4 shares did not react positively in January to the announcement and followed (albeit to a lesser extent) the rival’s performance, falling 16% in the period.
In this scenario, some houses reinforced their bet on Azul, also seeing an attractive valuation. This was the case of BTG Pactual, which raised its recommendation for AZULL4 shares from neutral to purchase. Gol was downgraded to sale, from the previous neutral recommendation, due to the risks present with Chapter 11.
BTG pointed out that the positive outlook for Azul reflects “a stronger capital structure after significant management liabilities over the past year, as well as less competition in the domestic market, after Gol voluntarily entered Chapter 11, reducing its capacity ”. Azul would have a discount of around 34% on the historical average, he assesses.
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The bank also highlights that the scenario for the industry has improved for the majority of companies in the airline sector. The outlook demonstrates a recovery in demand for international and domestic travel and, combined with restricted supply, would support a price environment seen as favorable by BTG.
In a recent analysis, Goldman Sachs also reinforced the view that it continues to see Azul well positioned to benefit from increased pricing power in the Brazilian domestic market in a context of falling aviation fuel prices throughout 2024. In the end January, the bank reiterated its purchase recommendation and raised the target price from R$26.60 to R$27.60.
In addition to Goldman, JPMorgan analysts recently reinforced a positive view for Azul among Brazilian airlines, adding that the results of the last quarter corroborated their “increasingly optimistic” view on airlines. “Azul continues to increase capacity and manage yields at historically high levels, at the same time that it has successfully completed its liability management and is traded at an attractive valuation,” he stated.
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Bradesco BBI has also reinforced a recommendation equivalent to purchase (outperform, performance above the market average) for AZUL4 amid Gol’s Chapter 11 process, with a target price of R$38.
It is worth noting, however, that market analysts remain divided on the stock, as shown by the LSEG compilation. Of the ten houses covered by AZUL4, 5 are for purchase and 5 for maintenance, with a target price of R$21.23.