Rogerio Araujo, an analyst from Bank of America Securities, maintained the Buy rating on Copa Holdings (CPA – Research Report). The associated price target remains the same with $185.00.
Rogerio Araujo has given his Buy rating due to a combination of factors that highlight Copa Holdings’ undervaluation in the market. Despite trading at a significant discount compared to historical multiples, Copa Holdings has demonstrated strong financial performance, including the highest EBIT margin since its IPO in 2005. The company’s balance sheet remains healthy, with a projected adjusted net debt to EBITDAR ratio of 1.3x by 2025, and it continues to widen its profitability gap compared to peers.
Additionally, Araujo points out that Copa Holdings is trading at a discount relative to U.S. airlines, which contrasts with its historical premium. This premium is justified by Copa’s efficient cash conversion and tax advantages, such as zero income tax on connection flights in Panama. Although the cost of equity has increased, it is offset by a significant expansion in return on invested capital. Furthermore, Copa’s cost efficiency and strategic initiatives, like transitioning to a single fleet model, support the sustainability of its margins. These factors contribute to the attractive valuation and the Buy recommendation.