WEBULL
WebtradeDownload

Is AerCap Holdings (AER) Undervalued On Its Frontier Deal And Zacks Upgrade?

Simply Wall St · 2d ago

AerCap Holdings (NYSE:AER) is back in focus after Frontier Airlines agreed to directly lease 10 A321neo aircraft from the company, shortly after AerCap received a Zacks Rank #1 rating.

The recent Frontier Airlines agreement and the Zacks Rank upgrade come as AerCap Holdings trades at US$146.48. The stock has a 90 day share price return of 6.97% and a 1 year total shareholder return of 20.70%. The 3 and 5 year total shareholder returns of 142.23% and 177.82% indicate momentum has been building over the longer term, even as the 30 day share price return of 5.55% shows some recent cooling.

Spot opportunities similar to AerCap Holdings by scanning our hand picked 53 high quality undervalued stocks, which combines stronger balance sheets with value oriented profiles.

AerCap Holdings now combines a recent Zacks Rank upgrade with fresh leasing demand from Frontier, yet the share price has already moved a long way. Does the current balance of risk and reward still support new buyers, or favour patience?

Most Popular Narrative: 18.1% Undervalued

The most widely followed narrative on AerCap Holdings pegs fair value at $178.90, compared with the last close at $146.48. This frames the latest Frontier deal and Zacks upgrade against a valuation backdrop that still implies a sizeable gap.

Prudent capital allocation, supported by a strong balance sheet and ongoing deleveraging, positions AerCap to capture opportunities in sale leasebacks and organic fleet growth as OEM deliveries ramp up, driving revenue and earnings upside while containing interest expense.

Read the complete narrative. Read the complete narrative.

Analysts are factoring in shrinking revenue, lower margins and a very different earnings base by the end of the decade. Yet the narrative still supports a much higher valuation that leans heavily on how investors will price those future earnings. It raises questions about which assumptions carry the most weight in that $178.90 figure, and how they tie back to AerCap Holdings' leasing engine and capital deployment plans.

Result: Fair Value of $178.90 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, AerCap Holdings still faces real pressure points, including a possible aircraft oversupply that could squeeze lease rates and customer credit issues that may hit cash flows.

Find out about the key risks to this AerCap Holdings narrative.

Next Steps

If this mix of concerns and optimism around AerCap Holdings feels finely balanced, consider taking a closer look at the underlying numbers and forming your own stance with 4 key rewards and 3 important warning signs.

Looking for more AerCap Holdings sized investment ideas?

If you want to build on what you have learned from AerCap Holdings, do not stop here. Use carefully filtered ideas to sharpen your watchlist and avoid missing opportunities.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.