El Al Israel Airlines remains a choice stock even after a 300 percent rise in its share price this year, according to Psagot Investment House, Globes said on Sunday.
Psagot gave El Al share a “buy” recommendation and a target price of NIS 4.50, a 70 percent premium on the market price.
The Israeli flagship line is benefiting, along with the rest of the industry, from favorable economic conditions.
Psagot analyst Noam Pinko commented, “El Al is in a good period financially, thanks to impressive results, due mainly to lower oil prices, but also as a result of the growing number of passengers at Ben Gurion Airport and streamlined operations, despite the growing competition.”
The lower fuel costs are converted as follows: A $0.01 drop in the price of a gallon of jet fuel cuts the company’s fuel expenses by $2.4 million (not including hedging expenses). Over the past year, the price of a gallon of fuel fell from $2.30 to $1.20, which means that the company’s ratio of fuel expenses to revenue fell from 34 percent to 24 percent, amounting to an annual saving of more than $200 million.
The reduced costs, plus El Al’s strong brand name and relatively cheap ticket, has enabled it to weather the foreign competition.
As for passenger traffic, it has been up 10 percent a year, and 18 percent in 2015.
The Psagot analyst gave the airline a NIS 4.50 target share price, which he terms relatively conservative, and takes a fall in EBITDA in 2016 into account. El Al, controlled by Knafaim Holdings, currently has a NIS 1.3 billion market cap.