From here only to Latam Airlines Group, according to Morgan Stanley. The bank started the airline on a very large scale and called it a top choice. Analyst Jens Spiess simultaneously set a price target of $40, which is about 51% above the stock’s closing price of $16.41 on Monday. Shares of Latam Airlines were listed on the New York Stock Exchange in July, after the company filed for bankruptcy in 2020. From its closing price on its first day of trading, the stock is up about 7%. LTM YTD chart on the mountain LTM YTD However, Spiess believes that the valuation of Latam Airlines still offers a steep discount, which the analyst said was “unreasonable.” “LTM is trading at a 55% discount compared to its pre-pandemic level. This is in stark contrast to how the valuation of US equity carriers has evolved post-pandemic,” the analyst wrote. “Even more surprising is that LTM earnings have recovered above pre-pandemic levels, while those carrying US assets, on average, are still lagging.” This steep discount is not justified considering that full-service carriers, such as Latam Airlines, have begun to outperform their low-cost counterparts after decades of underperformance, the company said. The company has also made improvements since the outbreak of the pandemic by implementing measures such as renegotiating aircraft leases on favorable terms, thereby reducing costs and increasing its net income. “The high willingness to spend on consumer travel, coupled with strong leverage and inflation, has left full-service carriers at a disadvantage compared to their low-cost carrier competitors,” Spies said. “LTM has come up big and thin during this pandemic, and we expect the company to continue to make improved profits and post strong earnings growth as it continues to expand and modernize its fleet.” Meanwhile, the analyst noted that Latam Airlines offers “unparalleled connectivity” as the largest full-service carrier in South America, which is still in its infancy. The airline offers 66 exclusive routes and 143 service routes alongside one competitor. These routes, where Latam Airlines has market dominance, are probably among the company’s most profitable. Spiess added that although profitability levels are unsustainable, Latam Airlines may be an exception to the rule. “We believe LTM’s profitability will remain above average for the long term due to several reasons we highlight below (ie a low cost profile supported by a modern efficient fleet and leases negotiated on favorable terms, favorable mix leverage, and price premiums versus competitors),” the analyst wrote.