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Investing.com -- UBS on Thursday upgraded Airbus (EPA:AIR) to Buy from Neutral, citing stronger demand visibility and signs of easing supply chain pressures that are expected to lift production rates in the coming years.
The bank raised its 12-month price target to €220 from €180, implying roughly 18% upside from the current levels. The target is based on a blend of discounted cash flow and peer multiples.
Airbus shares rose 1.3% in Paris trading as of 10:32 GMT.
UBS now models 945 deliveries in 2026, well above the sell-side consensus of about 915 and “likely lower” investor expectations.
“We see upside risk to 2026 guidance expectations, where we model 945 deliveries against consensus 915,” analyst Ian Douglas-Pennant said.
Airbus has changed its approach to supporting suppliers, offering better pricing and working capital terms, which UBS believes has already translated into stronger production rates.
The company has also built up 60 “gliders” — aircraft awaiting engines — to ensure suppliers see constant demand. Douglas-Pennant believes these measures significantly reduce the risk of downside surprises and could allow investors “to be surprised to the upside” as bottlenecks clear.
While the analyst still sees downside risk to 2025 guidance of around 820 aircraft, mainly due to engine delivery challenges, he expects stronger momentum beyond that. UBS now projects long-term peak A320neo production at 85 units per month by 2031, compared with Airbus’s official goal of 75 in 2027.
Consensus, by contrast, assumes a more cautious path with about 65 per month in 2026 and 1,075 deliveries by 2028, versus UBS’s 1,207.
“We see pent up demand for 2,500-3,500 aircraft given the production challenges seen at both Airbus and Boeing (NYSE:BA) since 2019, which gives Airbus good visibility on demand until at least 2030,” Douglas-Pennant continued.
He also stressed that the biggest operational risk for aircraft makers — launching a new model — is unlikely before 2030.
Higher delivery assumptions lifted UBS’s 2028 EPS forecast by 13%. The bank sees EBIT margins gradually improving from 9.3% in 2025 to 11.7% by 2029.
Despite Airbus trading at about 24 times forward earnings — more than 50% above pre-COVID levels — UBS views the premium as justified by strong demand visibility, lower near-term R&D risk, and the stock’s 20% discount to French peer Safran SA (EPA:SAF).