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On Thursday, CFRA analyst Alan Lim Seong Chun upgraded Deutsche Lufthansa AG (LHA:GR) (OTC: OTC:DLAKY) stock rating from Hold to Buy, setting a new price target of EUR9.00, a significant increase from the previous EUR6.00. The stock, currently trading at $8.62 and up 21% year-to-date, has shown strong momentum. The upgrade was based on a forward 2026 P/E multiple of 6.3x, which reflects a premium of one standard deviation above the airline’s five-year average P/E prior to the pandemic.
The analyst’s optimistic revision follows Lufthansa’s financial performance for 2024, where the airline’s adjusted EBIT and free cash flow surpassed expectations, reaching EUR1.65 billion and EUR840 million, respectively. These figures exceeded the forecasts of EUR1.59 billion and EUR655 million. With a market capitalization of $10.4 billion and an overall "GOOD" financial health score according to InvestingPro, Lufthansa’s revenue grew by 6% year-over-year, driven by a 7% increase in passenger volume, which hit 131.3 million.
Despite the revenue growth, Lufthansa faced a contraction in its EBIT margin by 3.2 percentage points to 4.4%. This was attributed to increased competition, higher operating costs, and the impact of strikes. In response, Lufthansa has initiated a turnaround program to mitigate these challenges.
The balance sheet of Lufthansa remained robust, with net debt experiencing a slight increase of 1% year-over-year. Looking ahead to 2025, Lufthansa’s management is anticipating growth in both capacity and revenue. They also expect an improvement in EBIT, although the company is preparing to navigate through obstacles such as cost inflation and engine issues.
With these considerations in mind, CFRA raised their 2025 earnings per share (EPS) estimate for Lufthansa to EUR1.23 from EUR1.12 and introduced a 2026 EPS forecast of EUR1.43. The new price target and rating upgrade reflect a positive outlook for the airline’s financial trajectory over the next few years.
In other recent news, Deutsche Lufthansa AG has seen a positive shift in analyst sentiment, as Citi analysts upgraded the airline’s stock rating from Sell to Buy. This upgrade was accompanied by a revised price target, now set at €8.50, up from the previous target of €5.50. The analysts highlighted several factors contributing to this optimistic outlook, including anticipated improvements in productivity and profit margins, supported by €1.5 billion in savings from restructuring efforts. Additionally, they expect better pricing dynamics due to reduced competitive pressure in a more stable geopolitical environment. Citi’s analysis suggests a favorable outlook for Deutsche Lufthansa AG, indicating potential recovery and growth in the coming years. The airline’s strategic efforts to enhance efficiency and reduce costs, along with supportive market conditions, are key elements in its financial advancement. These developments are likely to attract the attention of investors and market observers, who will be watching closely as the company navigates the post-pandemic travel industry.
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