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What Is Air New Zealand Limited's (NZSE:AIR) Share Price Doing?

Air New Zealand Limited (NZSE:AIR), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the NZSE. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Air New Zealand’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Air New Zealand

What's the opportunity in Air New Zealand?

Great news for investors – Air New Zealand is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is NZ$2.99, but it is currently trading at NZ$1.90 on the share market, meaning that there is still an opportunity to buy now. However, given that Air New Zealand’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Air New Zealand?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. In the upcoming year, Air New Zealand's earnings are expected to increase by 51%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since AIR is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

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Are you a potential investor? If you’ve been keeping an eye on AIR for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AIR. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Air New Zealand at this point in time. Case in point: We've spotted 3 warning signs for Air New Zealand you should be mindful of and 1 of them is concerning.

If you are no longer interested in Air New Zealand, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.