Latam Airlines SA (LAN), Latin America’s worst-performing carrier this year, rose to a four-week high as JPMorgan Chase & Co. raised its recommendation on the stock from the equivalent of sell.
Latam advanced 1.7 percent to 10,300 pesos at 12:13 p.m. in Santiago, the highest price since March 27 on a closing basis. The benchmark Ipsa index increased 0.4 percent. The airline’s American depositary receipts gained 1.2 percent to $21.53. Both the Chilean shares and ADRs fell 10 percent this year through yesterday.
JPMorgan increased its rating to the equivalent of hold, saying the stock’s drop in 2013 gives it room to rise toward the bank’s target price, analysts Fernando Abdalla, Jamie Baker and Carlos Louro wrote in an e-mailed note to clients. They forecast that the ADR’s will reach $25 by December. Latam was formed last year from Lan Airlines SA’s $3.3 billion takeover of Brazil’s Tam SA.
“We still believe that the current valuation premium to its Latin American peers is a bit excessive due to execution risks related to the Lan/Tam integration,” the analysts said.
Latam’s enterprise value trades at 12.5 times earnings before interest, tax, depreciation, amortization and rentals, or Ebitdar, according to data compiled by Bloomberg. The ratio is 67 percent higher than the average of five Latin American airlines.
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