Morgan Stanley sees further upside for Airbus ahead of likely XLR 321 launch
Airbus Group N.V.
€158.52
16:29 25/04/24
Analysts at Morgan Stanley revised their target price for shares of Airbus higher ahead of a likely spate of important milestones for the aerospace engineer over the next 12 months, including the possible launch of its single-aisle A321 XLR.
Boeing Co.
$162.27
07:30 25/04/24
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17:00 25/04/24
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They cautioned that clients "should not go overboard" in their expectations for the XLR, which they believed was likely to be launched at the Paris Air Show.
Nonetheless, the XLR did appear to be generating "significant interest" and it was possible that IndiGo might announce a big order for the new jet.
"We would not go overboard on expectations for A321 XLR orders at Paris (it is a niche within a niche). However, recent commentary from IndiGo suggested a big order could be in the pipe,and we think the XLR could be a high profile launch at the Air Show," they said.
Other potential positive catalysts on a 12-month view included finalising new government contracts for the A400M military transport.
The next Paris Air Show was due to be held on 17 to 23 June.
And they had also penciled-in a possible resolution of EU corruption cases, possibly in early 2020, and a more "committed" discussion around the long-term structure of the company's balance sheet (perhaps in mid-2020).
The investment bank attributed recent share price weakness to comments from IATA on traffic growth and airlines' profitability, together with trade tensions with the US, pointing out that the former might be linked to the grounding of Boeing's 737 Max.
Regarding the XLR 321, they said that a "reasonable" performance at the Paris Air Show might provide a boost to the shares.
Their base case scenario was for approximately 100 new orders plus maybe 100 conversions.
"We think the shares can trade up to a 6% FCF yield in 2021,given double digit earnings growth beyond that."
Morgan Stanley was at 'overweight' on Airbus, with its industry view at 'in-line'.