The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price was on form yesterday following the announcement of a travel bubble between Australia and New Zealand.
The airport operator’s shares pushed almost 3% higher to finish the day at $6.24.
Where next for the Sydney Airport share price?
One broker that believes the travel bubble between Australia and New Zealand will be a big boost to Sydney Airport is Goldman Sachs.
In response to the news, this morning the broker reiterated its buy rating and $6.73 price target on the company’s shares.
Based on the latest Sydney Airport share price, this implies potential upside of almost 8% over the next 12 months.
What did Goldman say?
Goldman Sachs believes that the travel bubble, which is due to open on 18 April, will deliver a much-needed return in international passengers through Sydney Airport’s gates, which will ultimately reduce retail lease abatement.
The broker commented: “Trans-Tasman volumes accounted for 14% of SYD’s total international in CY19 and the proposed move allows for international capacity to return. More importantly, it allows for international retail and duty-free business to recommence.”
“We are Buy-rated on SYD.AX. We maintain that SYD remains in an effective hibernation and expect SYD to be a major beneficiary of the Australian domestic inoculation strategy, if it facilitates relaxation of border restrictions.”
What about other airports?
The broker is less positive on Auckland International Airport Limited (ASX: AIA). It currently has a neutral rating and NZ$7.08 price target on its NZ shares. This compares to the current Auckland International Airport share price of NZ$7.75.
Goldman said: “Trans-Tasman volumes accounted for 31% of AIA’s total international in CY19. The AIA management indicated the business would be break even under a trans-Tasman bubble scenario.”
“We are Neutral-rated on AIA.NZ. AIA’s profitability remains tied to a recovery in international passenger movements, which is 97% below pre-Covid-19 levels and remains tied to the NZ government’s conservative border closure policies. That said, the company has limited cash burn (GSe NZ$10mn/mth) and solid available liquidity (NZ$1.6bn),” it concluded.
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More reading
- Trans-Tasman Bubble: Does this mean take off for ASX listed airports?
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- Qantas (ASX:QAN) share price takes off after latest COVID updates
- What’s driving the Sydney Airport (ASX:SYD) share price today?
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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