In the fall of 2023, Mexico became the largest aviation market in Latin America. According to the International Air Transport Association (IATA), it is estimated to double in size over the next 20 years. Mexican airline Volaris (NYSE:VLRS) — officially known as Concesionaria Vuela Compañía de Aviación S.A.B. de C.V. — is uniquely positioned to lead this growing market. The stock is up over 39% in the past six months, with further potential upside. Investors looking for solid-performing emerging market stock may find this one attractive.
Volaris: Mexico’s Top Airline
Volaris is an ultra-low-cost carrier based in Mexico. It primarily serves destinations in the United States and Central and South America. By number of passengers transported, it is the largest carrier in the Mexican domestic airline market, with a leading market share of 42%.
The company operates from multiple bases located in Mexico, including but not limited to Cancún, Culiacán, Guadalajara, León/Del Bajío, Mexicali, Mexico City, Monterrey, and Tijuana.
The Mexico aviation market was estimated at $7.96 billion and is projected to grow at a CAGR of 4.6%, potentially reaching a value of $11.85 billion by 2032.
Volaris’s Recent Financial Results Were Impressive
Volaris recently announced its Q1-2024 financial results. It reported revenues of $768 million, outpacing the consensus estimate of $694.6 million. Earnings per share of $0.29 significantly surpassed the analysts’ prediction of -$0.09.
Other notable results from the quarter include a 21% increase in total revenue per available seat mile (TRASM), which rose to $9.34. EBITDAR also saw a significant increase, surging by 91% to $235 million. Its EBITDAR margin was at 30.6%, representing an increase of 14 percentage points.
Is VLRS Stock a Buy?
Analysts following Volaris are bullish on the stock. For example, Barclays (NYSE:BCS) analyst Pablo Monsivais recently raised his price target on Volaris from $9 to $12 while reiterating an Overweight rating, noting the better-than-expected Q1 results and strong EBITDAR generation.
Volaris is rated a Strong Buy based on the recommendations and 12-month price targets six Wall Street analysts issued over the past three months. The average price target for VLRS stock is $12.92, which represents 53.8% upside from current levels.
VLRS stock had been trending downward for the past few years until recently, when it made a positive turn for the past six months. It trades at the lower end of its 52-week price range of $5.52-$15.05 but demonstrates ongoing positive price momentum, trading above the 20-day (7.27) and 50-day (7.50) moving averages.
Final Analysis on VLRS
Amid the growth of Mexico’s aviation market, Volaris stands out as the leading provider with dynamic growth characteristics. Its strong recent performance has given the stock positive momentum, and it shows the potential for further upside, making it a compelling option for investors interested in diversifying a portfolio with emerging market stocks.
