Credit Suisse recommends buy for Azul shares and cuts Gol’s recommendation for sale

Blue plane

SAO PAULO – One of the most affected sectors of the economy by the coronavirus pandemic, with the closing of borders around the world and drastic reduction in the flow of passengers, the air segment can offer good opportunities amidst the advance of vaccination. At least that’s Credit Suisse’s assessment.

In a report on Latin American airlines, the bank argues that the sector should benefit from a greater penetration of air travel in the region compared to other global economies.

Although in the short term the sector’s revenues may be negatively impacted by the increase in fuel prices, in the long term the bank believes that most Latin American economies should benefit from a higher oil price, as they are considered large producers.

Furthermore, higher fuel prices often bring capacity discipline, writes analyst Alejandro Zamacona, who signs the report, allowing airlines to achieve a healthier revenue environment.

Credit Suisse also writes that after the departure of Interjet and Avianca Brasil, the discipline of capacity will be stronger in Mexico and Brazil, as these two companies started to unsystematically add capacity to the market before Covid-19, harming the profitability of the sector.

Blue is preferred on B3

In this scenario, Credit Suisse’s preferred company on the Brazilian stock exchange is Azul (AZUL4). The bank started to cover the company’s shares with a recommendation performer (performance above the market average) and target price of R$50, which implies a potential for an increase of around 32% compared to the last closing.

Analysts argue that Azul has strong execution despite the Covid-19 pandemic, and leads the rebound in the Brazilian market, managing to expand its market share from 21% in 2019 to 34% in July this year.

In the year until Monday (30), AZUL4 shares had a drop of 3.6% on the Stock Exchange, compared to a 0.6% gain on the Ibovespa in the period. This Tuesday (31), the shares operated at a slight increase of 0.5%, around 10:30 am (Brasilia time), traded at R$ 38.09.

“We believe Azul will continue to outperform its peers in terms of capacity, leading the recovery in traffic among Brazilian operators. We also recognize that Azul took advantage of the situation caused by the Covid-19 pandemic to become a stronger company in terms of market share”, write the analysts.

Among the main catalysts for the BLUE4 shares, Credit Suisse cites a resumption of traffic to pre-Covid levels, provided it manages to maintain its share of the market.

A “desirable” opportunity for Azul, according to the analysis team, would be potential synergies of negotiating its fleet together with sister airlines (such as JetBlue, for example).

As for Gol (GOLL4), the bank reduced the recommendation from neutral to underperform (performance below the market average), amid low liquidity and high costs, with a target price for the company’s shares of R$19, 6% below the previous day’s closing.

According to Credit Suisse, Gol may benefit from a resumption of traffic in the business segment in Brazil, given its strong air network in São Paulo, Rio de Janeiro and Brasília.

However, lean free cash flow generation, increased competition with Azul, a weak liquidity position, plus a heavy cost structure and unclear ESG focus keep Credit Suisse less constructive with the company at the moment. .

On Tuesday, GOLL4 shares operated at a drop of around 1%, around 10:30 am, traded at R$ 19.94.

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