On Thursday, Piper Sandler sustained its Overweight rating and $3.00 stock price target for Surf Air Mobility Inc (NYSE:SRFM). The company's shares showed little change in after-hours trading following the announcement of second-quarter 2024 results that surpassed expectations.
Although the second-quarter revenue exceeded forecasts, Piper Sandler has slightly lowered its full-year 2024 estimates due to unanticipated fleet maintenance impacting third-quarter guidance. Nevertheless, the firm has increased its full-year 2024 EBITDA projections, crediting the management's efforts in significantly reducing quarterly operational expenses.
Surf Air Mobility, which aims to transform the commuter airline market with electric and hybrid powertrains, is expected to cut operating costs and enhance profitability over time. Piper Sandler's continued confidence in the company's strategy is reflected in the maintained Overweight rating. The price target remains pegged at $3, calculated at 1.5 times the projected 2026 enterprise value to revenue, with a discount rate of 15%.
The analyst's outlook for Surf Air Mobility underscores a positive view on the company's potential to innovate within the airline industry. Despite the near-term challenges reflected in the lowered revenue forecast for the third quarter of 2024, the improved EBITDA expectations suggest that the company's cost-reduction initiatives are yielding results.
The company's approach, focusing on sustainable aviation technologies, aligns with broader industry trends towards environmentally friendly transportation solutions. With its emphasis on reducing operating costs, Surf Air Mobility is positioning itself to capitalize on the growing demand for cost-effective and green travel options.
Piper Sandler's analysis indicates that, despite the short-term operational hurdles, Surf Air Mobility's long-term prospects remain strong. The firm's valuation methodology, considering future revenue and applying a discount rate, affirms the $3 price target, signaling confidence in the company's financial trajectory.
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