Latam Airlines Group SA (LFL:US), Latin America’s biggest carrier, rose the most in eight months after Deutsche Bank AG recommended buying the stock and said costs will decline as the company pares an expansion drive.
Latam, created last year by Lan Airlines’s $3.3 billion takeover of Brazil’s Tam SA, climbed 3.3 percent to 9,950 pesos at the close in Santiago, the biggest increase since August. It was the best performer on the benchmark Ipsa index, which rose 0.8 percent.
Deutsche Bank raised its recommendation from hold and set a 12-month price target of $27 for the company’s American depositary receipts (LFL:US), currently at $20.83. Santiago-based Latam will expand passenger capacity by 2 to 4 percent this year, compared with a previous growth plan of 4 to 6 percent, according to a presentation posted on its website in March.
“Capacity rationalization will have a positive impact on returns,” Deutsche Bank analyst Michael Linenberg said in an e- mailed research note to clients.
The stock is down 12 percent this year, the worst performance among airlines with a market value above $1 billion after Korean Air Lines Co.’s 30 percent drop. Latam’s profit fell 97 percent last year to $11 million as it integrated Tam’s operations.
“The stock’s recent underperformance creates an attractive entry point for investors,” Linenberg wrote.
Latam will probably also benefit from an expected marketing agreement between Tam and Fort Worth, Texas-based American Airlines Inc. and from a retreat in jet fuel prices, according to Linenberg.
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