LHA: Mixed Ratings And Fleet Delays Will Shape Recovery Path Ahead

Analysts have nudged their fair value estimate for Deutsche Lufthansa slightly higher to roughly EUR 8.01 from about EUR 7.89, citing moderately stronger revenue growth expectations and a higher future earnings multiple, despite ongoing profitability and macro headwinds reflected in mixed recent price target revisions.

Analyst Commentary

Recent Street research on Deutsche Lufthansa presents a mixed outlook, with price targets clustering below the updated fair value estimate and ratings skewed toward caution. While some adjustments acknowledge incremental improvement, the prevailing view still reflects concern about the company’s ability to sustain profitable growth after a weak 2024.

Bullish Takeaways

• Bullish analysts view the recent uplift in certain price targets as recognition that traffic recovery and revenue trends may be stabilizing. This, in turn, could support gradual multiple expansion from depressed levels.
• The modest upward price target revision from JPMorgan signals that, even within a cautious framework, there is room for upside if Lufthansa executes on cost discipline and capacity management.
• Supportive voices highlight that the current share price already discounts many of the known macro and operational headwinds. This creates potential valuation asymmetry if earnings surprise to the upside.
• Some bullish analysts argue that a normalized operating environment, combined with disciplined capital allocation, could narrow the gap between intrinsic value estimates and the more conservative Street targets.

Bearish Takeaways

• Bearish analysts emphasize that multiple recent ratings skew toward Underweight or Neutral, with target prices in the EUR 5 to EUR 7.30 range. This implies limited upside or even downside relative to the latest fair value estimate.
• The downgrade from Buy to Neutral, alongside a reduced price target, underscores concerns about execution risk, particularly around improving margins after a weak 2024 earnings profile.
• Initiation with an Underweight rating and a low price target reflects skepticism that Lufthansa can fully offset structural cost pressures and competitive intensity in the medium term.
• Overall, the concentration of targets below intrinsic value estimates indicates investor hesitation about the timing and durability of any recovery in profitability and return on capital.

What's in the News

• Morgan Stanley initiated coverage of Lufthansa with an Underweight rating and a EUR 5.40 price target, citing ongoing headwinds following a weak 2024 (Morgan Stanley).
• Boeing's 777X entry into commercial service has slipped to early 2027 from 2026. Launch customer Lufthansa has already excluded the jet from its fleet plans until 2027, signaling planning for the delay (Bloomberg).
• Turkish Airlines publicly denied media reports that it is negotiating to acquire all shares of SunExpress, affirming that the joint venture continues under the existing 50 50 ownership with Lufthansa and that there has been no change in the shareholding structure (Borsa Istanbul filing).
• Separate reports indicate Turkish Airlines is interested in buying Lufthansa's 50 percent stake in SunExpress to accelerate expansion on Europe Middle East routes, but Lufthansa is said to be resisting due to confidence in the carrier's profitability. The company has declined to comment on the discussions (Corriere della Sera).

Valuation Changes

• The Fair Value Estimate has risen slightly to about €8.01 from roughly €7.89, reflecting modestly stronger fundamentals in the model.
• The Discount Rate has fallen slightly to approximately 8.71 percent from about 8.82 percent, indicating a marginally lower perceived risk profile.
• Revenue Growth has increased moderately to around 3.95 percent from roughly 3.46 percent, implying a somewhat more optimistic top line outlook.
• The Net Profit Margin has fallen meaningfully to about 4.10 percent from roughly 4.91 percent, signaling lower expected profitability despite higher revenue growth.
• The Future P/E has risen noticeably to about 6.8x from roughly 5.7x, suggesting a higher assumed valuation multiple on forward earnings.