It is a new beginning for LATAM Airlines (LTMAQ), although definitely not one the company expected before COVID-19’s devastating impact.
LATAM Airlines was delisted from the New York Stock Exchange, and the stock began trading OTC under a new LTMAQ ticker.
Last month, LATAM became COVID-19’s largest airline casualty, when it filed for Chapter 11 Bankruptcy in New York. The company will now commence restructuring, to set itself up for a post COVID-19 environment.
Although Deutsche Bank’s Michael Linenberg believes LATAM is better positioned than fellow recently bankrupt airline Avianca to weather the storm, the 5-star analyst expects further headwinds.
Bans on international travel have resulted in Latin American airlines getting hit especially hard by the pandemic, with recent data suggesting “disruption to air travel in LATAM’s core markets has not yet found a bottom.” After the US, Brazil sits in second place as the country with most COVID-19 patients and infections have soared in Chile, LATAM’s home country, indicating it may be a while before the region snaps back to anything resembling normality.
For the new ticker, now trading on the OTC markets, expect wild swings of volatility. In today’s irrational markets, and following Hertz’ post- bankruptcy 900% surge, it wouldn’t be out of the question for investors to the same for LATAM. However, Linenberg advises investors to stay away.
The analyst said, “While we do think the equity can survive the process given the company’s liquidity, historically strong market position as well as financial support from key insiders, we do think that there is some likelihood that current shareholders could face dilution once the company has concluded what we believe will be a successful restructuring… That could mean an even lower share price than where the stock is currently trading…”
Accordingly, Linenberg rates LATAM a Sell along with a $1.00 price target. The new figure implies downside of 44% from current levels. (To watch Linenberg’s track record, click here)
The market’s collective wisdom agrees. LATAM has a Moderate Sell consensus rating, based on 3 Hold ratings, 5 Sells and a single Buy. At $2.63, the average price target implies a 33% downside from the current share price of $186.05. (See LATAM stock-price forecast on TipRanks)
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