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On Friday, Barclays (LON:BARC) initiated coverage on Finnair (FIA1S:FH) (OTC: FNNNF) with an Underweight rating and a price target of EUR2.80. The new rating reflects a cautious stance from the firm due to estimates that significantly trail behind the Bloomberg consensus, particularly with EBIT forecasts for the airline being 33% and 16% below the 2025 and 2026 consensus, respectively.
Barclays analysts, led by Andrew Lobbenberg, expressed concerns over Finnair’s revenue growth, especially given the airline’s planned 10% capacity expansion by the fiscal year 2025. This expansion is largely focused on the North Atlantic routes, prompting even greater caution from the analysts. Additionally, the ongoing labor dispute with pilots is expected to impact both unit revenues and costs, further contributing to the cautious outlook.
The analysts also presented a scenario in which Finnair could return to its former core business model by January 2026, which could potentially lead to a valuation of EUR4.60 per share. However, they highlighted the current difficulty in predicting geopolitical developments and their impact on the airline industry. As of April 2, Finnair’s shares were trading at approximately EUR3.20, suggesting a 22% probability of the airline returning to its original business model according to Barclays’ assessment.
Barclays’ report emphasizes the importance of earnings momentum in the valuation of airline stocks. Given their projection of Finnair’s trading performance in 2025 to be significantly weaker than the market consensus, they anticipate a downward adjustment in the consensus estimates, which is likely to be followed by a decline in the share price.
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