Citigroup cut its share price target and earnings estimates for UAE-based budget carrier Air Arabia, following a disappointing second quarter, and cited an expected fall in 2010 average ticket price.
Citigroup now sees average ticket price in 2010 falling by 2 percent, compared with its prior view of a 3 percent growth.
Last week, Air Arabia said net profit for the second quarter fell 44 percent, hit by declining yields hurting airlines globally and higher fuel prices and falling short of most analysts forecasts.
"Having made a 9.5 percent net margin year to date, we believe the company’s long-term target of 20 percent is unlikely to be achieved until 2012 at the earliest," Citigroup said.
The brokerage, however, said the stock still held good value and expects the two-year earnings-per-share declines to end in the fourth quarter and recover from 2011. It maintained its "buy" rating on the stock.
Citigroup lowered its price target on the stock of Air Arabia to 1.15 dirhams from 1.35 dirhams. EPS estimates for 2010 were slashed by 30 percent to 0.0583 dirhams.
