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On Friday, JPMorgan initiated coverage on Corporacion American Airports SA (NYSE:CAAP), assigning an Overweight rating and establishing a price target of $22.50. The new price target suggests a 25% upside potential from the current price of $17.93, with the possibility of over 55% when including expected regulatory rebalances. According to InvestingPro data, analyst targets for CAAP range from $19 to $24.50, with the company maintaining a "GREAT" financial health score of 3.39/5.
The JPMorgan analyst supports this positive outlook with several key factors. Firstly, the valuation of CAAP is considered attractive at 5.7 times its estimated 2025 enterprise value to EBITDA ratio, which stands at a roughly 30% discount compared to its peers and is nearly aligned with pre-Milei levels, even considering the re-rating of Argentina. InvestingPro data reveals the company trades at a P/E ratio of 8.67, supporting the attractive valuation thesis. Two additional valuation insights are available on InvestingPro, along with comprehensive financial metrics.
Secondly, CAAP is expected to generate strong and sustainable free cash flow, which is anticipated to yield an average return of 11% over the next three years. This robust financial health is a cornerstone of the firm’s positive assessment, supported by the current free cash flow yield of 14% and strong return on equity of 31%.
The analyst also noted ongoing regulatory discussions that could add more than 30% to the fair value of CAAP. These discussions are seen as a potential catalyst for the stock’s future performance.
Lastly, the company’s history of successful inorganic growth was highlighted, along with the mention of future opportunities that may arise. This track record is seen as an indicator of CAAP’s ability to continue expanding and increasing its market presence.
While JPMorgan has expressed a favorable stance on CAAP, the firm also continues to recommend ASUR as its top pick within its Latin America airports coverage, maintaining an Overweight rating on that stock as well.
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