The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price has been out of form over the last 12 months because of the COVID-19 crisis.
Since this time last year, the airport operator’s shares are down over 30%.
Is this a buying opportunity for investors?
According to a note out of Goldman Sachs, the Sydney Airport share price could be in the buy zone now.
This morning its analysts have put a buy rating and $6.78 price target on the company’s shares.
This price target implies potential upside of approximately 11% over the next 12 months.
Why is Goldman Sachs positive on Sydney Airport?
The broker notes that Sydney Airport is Australia’s largest domestic and international airport and the major gateway for international tourists arriving in the country.
In light of this, it expects the company to be “a major beneficiary of the global vaccine trade and the reopening of Australia’s international borders.”
Though, Goldman does acknowledge that the emergence of the new more contagious UK-strain of COVID-19 has added an increased degree of uncertainty over when international border will re-open and has increased disruption to domestic movements.
It commented: “This uncertainty, particularly on the domestic front has increased the risk profile of future aeronautical cash flows and earnings, and compounded by the possible requirement of further rental abatement through CY21 to retain tenants.”
Nevertheless, the broker believes Sydney Airport has the funds to ride out the storm and sees value in its shares at the current level.
Goldman explained: “We continue to believe SYD has sufficient liquidity to withstand this extended period of uncertainty and see limited need for an additional capital. Following the A$2bn equity raising in August, SYD has reinforced its balance sheet and has taken effective measures to mitigate cash outflows and capital commitments through CY21.”
“While we have lowered our 12 month target price by c.3.4% to A$6.78, we note that at current levels the stock is still offering c.11% upside (vs 6% average for our coverage). We retain our Buy rating,” it concluded.
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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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