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On Wednesday, Jefferies analyst Thanh Ha Pham adjusted the firm’s stance on Japan Airlines Co., Ltd (9201:JP) (OTC: JAPSY), a $7.77 billion market cap airline with a "GREAT" InvestingPro financial health score, downgrading the stock from Buy to Hold and setting a new price target of JPY2,900, a decrease from the previous JPY4,100. The revision follows the airline’s third-quarter fiscal year 2025 earnings report.
Pham’s analysis indicates that although Japan Airlines is projected to meet its fourth-quarter fiscal year 2025 EBIT target, thanks to favorable foreign exchange and fuel prices, the fiscal year 2026 earnings outlook is anticipated to be more difficult. The company maintains impressive gross profit margins of 59.82% and has demonstrated strong revenue growth of 12.65% over the last twelve months. The downgrade is partly due to an expected loss in market share to Chinese airlines. Jefferies forecasts an EBIT of JPY174.5 billion for the company, which is slightly below the company’s own target of JPY200.0 billion and the consensus estimate of JPY176.3 billion.
The report also hints at potential additional shareholder returns, which are to be announced on March 19, 2025, during the company’s Medium-Term Plan update. This information suggests that investors might expect some form of financial benefit, although specifics will only be confirmed at the upcoming announcement.
The downgrade reflects Jefferies’ revised earnings forecasts for Japan Airlines, taking into account both the competitive landscape of the airline industry and the broader economic factors that influence the company’s financial performance.
Investors and stakeholders of Japan Airlines will likely watch closely for the Medium-Term Plan update on March 19, 2025, to assess the company’s strategies and financial planning for the coming years, as well as any potential shareholder returns that may be revealed. With a beta of 0.65 indicating lower price volatility and current InvestingPro Fair Value analysis suggesting the stock is slightly undervalued, investors might find additional insights through InvestingPro’s extensive financial metrics and analysis tools.
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