LHA: Mixed Ratings Will Shape Recovery Outlook Amid Delayed Widebody Deliveries

The analyst price target for Deutsche Lufthansa has been modestly raised to EUR 7.89 from EUR 7.50 as analysts factor in slightly lower perceived risk and improving profit margins, even as they moderate long term growth and valuation assumptions in light of mixed recent research views.

Analyst Commentary

Recent Street research on Deutsche Lufthansa highlights a mixed backdrop, with modest upward adjustments to some price targets offset by more cautious ratings and valuation resets.

Bullish analysts point to incremental improvements in balance sheet strength and operational execution, which they believe justify slightly higher fair value estimates despite ongoing industry headwinds.

Bearish analysts, including those at JPMorgan, emphasize that even with higher targets, their stance remains cautious, citing structural challenges, competitive pressures, and lingering concerns around the companys ability to deliver sustainable margin expansion.

Overall, the dispersion in targets and ratings underscores a market view that Lufthansa is in a gradual recovery phase, but with limited near term upside relative to perceived execution and macro risks.

Bullish Takeaways

• Incremental price target hikes, even from cautious coverage, suggest that downside risk to earnings and cash flow is seen as more contained than earlier in the year.
• Improving profit margins and cost discipline are viewed as supportive of a gradual re rating case, particularly if unit revenue trends stabilize.
• Bullish analysts see scope for better free cash flow generation to support deleveraging, which could narrow the valuation discount to European peers.
• The recent modest uplift in the consolidated price target reflects growing confidence that management can execute on capacity and yield management plans.

Bearish Takeaways

• The downgrade to a more neutral stance and initiation at Underweight signal concern that current valuation already discounts much of the expected recovery.
• Bearish analysts highlight lingering operational and macro headwinds after a weak 2024, which could cap margin expansion and delay a more material rerating.
• Lowered or subdued price targets in the EUR 5 to EUR 6 range imply limited upside versus risk, especially if demand softens or cost inflation proves sticky.
• Uncertainty around long term growth visibility, including competitive dynamics on key routes, leads cautious analysts to favor more defensive names in the sector.

What's in the News

• Morgan Stanley initiated coverage of Deutsche Lufthansa with an Underweight rating and a EUR 5.40 price target, highlighting ongoing headwinds following a weak 2024 (Morgan Stanley, periodical).
• Boeing's 777X commercial debut has been pushed back to early 2027 from 2026, and Lufthansa, as launch customer, is excluding the jet from its fleet plans until 2027 in anticipation of the delay (Bloomberg, periodical).
• Conflicting signals emerged around SunExpress, with Turkish Airlines publicly denying media reports that it is negotiating to acquire all shares of the joint venture while separate reports suggest it is pushing to buy Lufthansa's 50 percent stake, which Lufthansa is reportedly resisting due to confidence in the unit's profitability (company filings and Corriere della Sera, key developments).

Valuation Changes

• The consensus analyst price target fair value estimate has risen slightly to €7.89 from €7.50, reflecting modestly higher expected equity value.
• The discount rate has fallen moderately to 8.82 percent from 9.52 percent, indicating a lower perceived risk profile in the valuation model.
• Revenue growth assumptions have been trimmed slightly to 3.46 percent from 3.86 percent, signaling somewhat more conservative top line expectations.
• The net profit margin forecast has increased meaningfully to 4.91 percent from 4.15 percent, highlighting improved profitability assumptions.
• The future P/E multiple has been reduced to 5.70x from 6.60x, implying a more cautious stance on valuation despite better margin expectations.