We recently published a list of the 10 Worst Airport Stocks to Buy. In this article, we are going to take a look at where Corporación América Airports S.A. (NYSE:CAAP) stands against the other airport stocks to buy.
Air travel plays a significant role in the global economy as it directly contributes to economic growth by facilitating trade and tourism. The aviation industry generates millions of jobs worldwide, both directly and indirectly.
The industry was hit quite hard by the pandemic and later the Russia-Ukraine conflict. However, it has experienced a remarkable resurgence in passenger demand, which is surpassing pre-pandemic levels and signaling a strong recovery for the aviation industry.
Bain & Company forecasts reveal that annual air travel demand is on track to exceed pre-pandemic levels, specifically measured by revenue passenger kilometers (RPK). By 2030, the global RPK is expected to reach 11.4 trillion, which represents 136% of the 2019 volume.
Moreover, the Airports Council International (ACI) World released its 2024 Annual World Airport Traffic Report on September 19 where the council compiled data from over 2,700 airports across more than 180 countries.
The council forecasts a 10% increase in global passenger traffic for 2024, at approximately 9.5 billion. In 2023, passenger traffic hit 8.7 billion, representing a 30.6% increase from 2022 and recovering 95% of pre-pandemic levels.
For 2024, the passenger numbers are expected to exceed 4% of pre-pandemic numbers. Data from the first half of 2024 shows an 11% year-over-year increase in passenger numbers, as international travel increased by 17%. The report projects domestic travel will account for 5.4 billion passengers, while international travel is expected to reach 4.1 billion.
Artificial Intelligence: Transformative Trend In Airline Industry
Using AI in the airline industry marks a significant change toward improving efficiency and customer satisfaction. It shows how technology can make services better while still keeping the important human touch in operations. We discussed this in our article about 11 Worst Aviation Stocks to Buy According to Analysts. Here is an excerpt from the article:
“Like most industries of today, airlines are also implementing AI to improve the efficiency of their operations. According to an August report by CNBC, these companies are using AI for tasks like ground control, customer service, and optimizing flight routes.
American Airlines introduced its AI-powered “smart gating” system at its Dallas-Fort Worth control center. The tool automatically assigns gates to incoming flights, which cut runway taxi time by around 20%, or two minutes per flight, across five airports. The system also helps passengers, baggage, and crews make quicker connections, which improves overall efficiency.
Alaska is using AI to streamline flight paths and optimize aircraft turnaround times at gates. Its tool is described as “Waze for the skies,” and it uses AI to plan faster routes, which saves fuel and reduces delays. Additionally, the system monitors ground operations as it tracks when fuel, catering, and baggage trucks arrive and depart, which allows agents to address delays immediately.
United has implemented generative AI for customer service, especially during flight disruptions. The AI generates detailed, empathetic messages explaining delays, which has increased customer satisfaction by 4% since its rollout on 6,000 flights.”
Moreover, the report by CNBC stated that AI will not be significantly replacing human labor. Instead, it will help humans work more efficiently.
Our Methodology
For this article, we used the Yahoo Finance stocks screener along with ETFs and online rankings to identify over 20 airport or airport related stocks. We narrowed our list to 10 stocks with the lowest average analyst price target, as of September 26. The stocks are listed in descending order of their average price target. We also added hedge fund sentiment around the stocks that trade on the NYSE and NASDAQ, which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Is Corporación América Airports S.A. (NYSE:CAAP) One of the Worst Airport Stocks to Buy?
Corporación América Airports S.A. (NYSE:CAAP)
Number of Hedge Fund Holders: 5
Average Analyst Price Target Upside: 24.36%
Corporación América Airports S.A. (NYSE:CAAP) is a major global private airport operator, managing 52 airports across Latin America and Europe, including countries like Argentina, Brazil, Uruguay, Ecuador, Armenia, and Italy.
In 2023, the company’s airports served 81.1 million passengers, just 3.6% lower than pre-pandemic levels in 2019. Of these passengers, 35% were international, 56% were domestic, and 9% were in transit. It ranks at 7 on our list of worst airport stocks to buy.
The company’s primary revenue driver is passenger traffic and earns aeronautical revenue through fees charged to departing passengers and airlines for landing, parking, and using its facilities. Its commercial revenue is generated from services like retail, duty-free shops, parking, food and beverages, and advertising.
Corporación América Airports (NYSE:CAAP) reported its second quarter results on August 21. According to its unaudited financial results for Q2 2024, its consolidated revenues were $366.1 million, up slightly by 0.2% year-over-year.
Aeronautical revenues increased 3.2%, which offset a 2.9% decline in commercial revenues. Passenger traffic fell by 7.8% to 18.2 million, while cargo volume grew by 4.7%. Lastly, the company maintained a strong cash position of $439.4 million.
According to the company’s CEO, it is negotiating a $400 million CapEx plan with the Armenian government and is awaiting approval for Florence Airport’s new master plan. The company is also exploring growth opportunities, driven by recent open skies agreements in Argentina that may open up new routes and destinations. The company’s solid balance sheet positions it to pursue long-term global growth initiatives.
Overall, CAAP ranks 7th on our list of the worst airport stocks to buy. While we acknowledge the potential of CAAP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CAAP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
