Michael Hakes - CFA, MBA Airbus EADSY-OTC TOP PICK Nov 01, 2024

Allan Tong’s Discover Picks The company is pushing hard to produce its A320 and A220 planes which could give the 737 Max a run for its money. Airbus trades at a 22.2x PE and 0.5x price/book. It pays no dividend. The street has 11 buys and one hold on the airliner. EADSY currently trades 10% below its 52-week peak of US$35. Read 3 Value Euro Stocks for our full analysis.

Everyone is aware of Boeing's problems with the 737 Max (there's a film about this is on Netflix). The Airbus 320neo is outselling the 737. They also have a big defence business in Europe, and defence budgets are rising. This trades at 20x earning, so not cheap, but earnings will grow by 12-13% annually for the coming decade. (Analysts’ price target is $40.59)

Travel is back including cross-border as Japan and China reopen. The next few years will be strong for travel. Boeing has too many issues, but not Airbus at all. Airbus planes are the best in the market and they get a kicker from their defence business. Good balance sheet. They have a 10-year backlog for their planes. (Analysts’ price target is $42.06)

Boeing and Airbus have a duopoly. She hasn't owned Boeing for years. In a given year, one company gets more orders, then the next year the other gets more. It's split this way. Instead of these companies, she prefers owning the suppliers to these companies.

(A Top Pick Jun 07/22, Up 18%)

Prefers to BA. New plane is the best one out there with the lowest cost and fuel efficiency. Cleaner story than BA. Huge backlog stalled by parts shortages. Production rates will increase next 2-3 years, which will drive earnings.

(A Top Pick May 02/22, Up 23%)

European stocks have recovered since the war in Ukraine started. Can deliver planes for the next 8-9 years without another order. Has benefited from issues with Boeing. Downside is interference from French government.

Allan Tong’s Discover Picks

Still, there are some caveats: Airbus’ beta of 1.66 makes the stock vulnerable to sudden market downturns. The stock current trades at 28.3x PE, above its five-year average of 25.64x. Also, EADSY is trading within $2 of its 52-week high of $35.52 at levels not seen since January 2020. The ongoing parts shortage doesn’t help overcome its multi-year backlog. Read Planes, pizza and clothes for our full analysis.

There are some supply issues short term but it has a backlog for the next decade. It is a duopoly and its main competitor is facing huge issues. There are two other businesses that you are getting for free. The defence business in Europe is doing well. It trades at 20X earnings with solid growth over the next decade.         Buy 3  Hold 0  Sell 1

(Analysts’ price target is $41.66)

They're trying to make more narrow-body airplanes, but suffer supply chain problems. So, they've guided down which impacted shares. But they have 10 years' backlog. The dip now is an opportunity.

(Analysts’ price target is $41.23)