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Investing.com -- Citi Research downgraded Airbus SE (EPA:AIR) to “neutral” from “buy,” citing a stronger euro as a key factor in lowering the company’s target price.
The brokerage reduced its target price for the stock to €183 from €209, reflecting the impact of the euro’s recent appreciation against the U.S. dollar.
Airbus has significant exposure to euro/dollar exchange rates due to its cost structure and revenue base. While a large portion of the company’s costs are incurred in euros, its sales are predominantly denominated in U.S. dollars. This imbalance creates a material transaction exposure, according to Citi analysts.
Although Airbus hedges its currency risk with a typical three-year horizon, the analysts said the foreign exchange rate remains a fundamental driver of the company’s valuation.
“A strong euro vs US$ means that Airbus suffers from higher costs,” the report noted. Citi estimates that every 1 cent weakening in the dollar reduces Airbus’ fair value by €3–€3.5 per share.
The previous target price of €209 was based on a euro/dollar rate of 1.05. Citi now uses the current spot rate of 1.14, combined with the three-year forward spread, in line with Airbus’ hedging practices.