Latam Airlines SA, Latin America’s worst-performing carrier this year, rallied to a four-week high after JPMorgan Chase & Co. raised its recommendation on the stock from the equivalent of sell.
Latam advanced 0.7 percent to 10,193 pesos at the close in Santiago, the highest price since March 28, as the benchmark Ipsa index increased 0.5 percent. The airline had fallen 10 percent this year through yesterday.
JPMorgan increased its rating to the equivalent of hold as the stock’s drop in 2013 created room for gains, analysts Fernando Abdalla, Jamie Baker and Carlos Louro wrote in an e-mailed note to clients. They forecast American depositary receipts in Latam, which rose to $21.33 today, will reach $25 by December. Latam was formed last year from Lan Airlines SA’s $3.3 billion takeover of Brazil’s Tam SA.
“We still believe that the current valuation premium to its Latin American peers is a bit excessive due to execution risks related to the Lan/Tam integration,” the analysts said.
Latam’s enterprise value is 12.5 times earnings before interest, tax, depreciation, amortization and rentals, or Ebitdar, according to data compiled by Bloomberg. The ratio is 67 percent higher than the average of five Latin American airlines.