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Investing.com - UBS initiated coverage on Virgin Australia Holdings Ltd (ASX:VGN) with a Buy rating and a price target of AUD3.90 per share.
The investment bank cited Virgin Australia’s simplified portfolio and strategy as key factors that should appeal to investors interested in the Australian domestic aviation market, which UBS characterized as relatively high quality and low risk.
UBS sees a promising earnings outlook for Virgin Australia into fiscal year 2026, driven by relatively stable fares, declining fuel expenses, and transformation benefits, though the firm noted it remains conservative regarding the latter.
The valuation appears attractive compared to Qantas, with Virgin Australia currently trading at a next-twelve-month price-to-earnings ratio of 6.5x (a 29% discount to Qantas) and an enterprise value to EBITDA ratio of 2.9x (a 30% discount to Qantas), according to UBS estimates.
UBS highlighted that Virgin Australia offers a stronger growth outlook and benefits from a portfolio mix predominantly consisting of higher return-on-invested-capital domestic operations.
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