With industry fundamentals improving, the future looks much brighter for WestJet Airlines Ltd. shares. For now, however, investors should look elsewhere for exposure to the global airline sector, says a new report from Raymond James.
"We continue to encourage investors who can look outside Canada to consider some of the airline stocks that our Raymond James counterparts cover in the U.S. and other regions, where valuations appear more attractive and capacity has been more contained," said Ben Cherniavsky, Raymond James analsyt.
"For those limited to Canada, we continue to recommend OUTPERFORM‐rated Air Canada shares as a better, albeit riskier, way to play the near‐term recovery trends because of its exposure to emerging markets, business travel, and cargo."
WestJet got a traffic boost from the Olympics and sun destination travel in February, however the demand came at a cost as management indicated Wednesday that revenue per available seat mile (RASM) in the first quarter of 2010 is tracking a decline of “less than 3%.”
"This marks a marginal upward adjustment from previous 1Q10 RASM guidance of a “less than 5%” decline. Nevertheless, we still harbour some concerns about WestJet’s RASM prospects for the year, especially for 2Q10 and 3Q10 when a chunk of its capacity will be dumped into the domestic market," said Mr. Cherniavsky.
He left his Market Perform rating and $13.50 price target unchanged.