Air France-KLM: Deutsche Bank upgrades stock

(CercleFinance.com) - On Friday Deutsche Bank upgraded its rating on Air France-KLM shares from "sell" to "hold", mainly citing valuation issues.


While it believes that the French airline stock may have seemed expensive at the time it announced its capital increase, with a price of 1.95 euro that reflected a 2024 P/E of 7.7x, the broker believes that the stock's valuation has become more reasonable after its recent 33% correction, based on a price of 1.3 euro corresponding to a 2024 P/E of 5.1x.

In a study on the airline sector, Deutsche estimates that the 2.25 billion euro fundraising will probably not be enough to enable the group to post a debt ratio of 2x or 2.5x next year, but that this scenario could be envisaged by 2024.

In any case, the broker believes that the stock can be considered a more attractive investment proposition now that its balance sheet has been cleaned up.

However, Deutsche Bank warns that investors may prefer to steer clear of major airline stocks, which are considered to be particularly sensitive to a recession scenario.



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