Stock Analysis

Is There Now An Opportunity In Air New Zealand Limited (NZSE:AIR)?

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NZSE:AIR
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Air New Zealand Limited (NZSE:AIR), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the NZSE. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on Air New Zealand’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Air New Zealand

What is Air New Zealand worth?

Great news for investors – Air New Zealand is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is NZ$2.99, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Air New Zealand’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Air New Zealand generate?

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NZSE:AIR Earnings and Revenue Growth November 27th 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. In the upcoming year, Air New Zealand's earnings are expected to increase by 51%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since AIR is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on AIR for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AIR. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Our analysis shows 3 warning signs for Air New Zealand (1 is potentially serious!) and we strongly recommend you look at these before investing.

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Find out whether Air New Zealand is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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