Hawaiian stock has an intrinsic value today of $20 per share, >97% above current trading levels. The significant disconnect presented by HA's valuation is sweetened by several near and intermediate-term catalysts we believe will drive share price toward intrinsic value:
Margins Set to Rise as Growth Slows in 2014, GAAP Financials to Begin Reflecting HA's Potential:
With exception to initiating service to Beijing, HA is pausing new route initiations in 2014. By Q4, only 8% - 10% of HA's routes will be less than 1 year old. We expect this to translate into improved unit revenues and margin expansion; our assumptions are supported by management expectations.Shares of Hawaiian Holdings Inc. ("HA" or "Hawaiian") are grossly undervalued, reflecting a deep misunderstanding of the company's economics. In 2010, HA began investing heavily in growth, implementing a capex program to build additional capacity primarily in support of new international routes. Being that initiating services on routes involves start-up costs, and that from the time service is initiated they take 3 years to reach optimal profitability (i.e., to mature), HA's GAAP margins were negatively impacted; put another way, from 2010 - 2013, when HA was expanding most aggressively, its GAAP financials both understated and obscured its economic potential.
Rating:
Buy HA  16.63 % | ||
Rating:
Buy HA  1.28 % | ||
Rating:
Buy HA 16.63 % | ||
Rating:
Hold HA | ||
Rating:
Buy HA 157.64 % |
