(BFM Bourse) – The Swiss bank has lowered its buy advice to neutral on the aircraft manufacturer, judging that the potential good news is already integrated into the group’s price. The establishment also perceives more downward than upward risks on business jets.
Dassault Aviation is currently gravitating to unprecedented altitudes. The aircraft manufacturer reached an all-time session high on April 15 at 211.60 euros and has only fallen very moderately since.
The designer of the Rafale fighter jet and the Falcon range of business jets has benefited in recent years from renewed investor interest in the defense sector, with several conflicts, whether in Ukraine or in the Middle -East.
The attractiveness of the Rafale, with numerous orders, including one for 80 aircraft from the United Arab Emirates, finalized in 2022, has also supported the group. Even if the weakness in commercial activity of business jets and difficulties in the supply chain, with disappointing deliveries, brought some shadows to the picture.
Now, UBS believes it is time to take profits on the stock. The Swiss bank lowered its opinion on the stock from “buy” to “hold” on Monday, while adjusting its price target from 220 euros to 200 euros. Dassault Aviation shares fell 1.2% on the Paris Stock Exchange in reaction.
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The bank doesn’t really have any complaints about the group but thinks that its journey deserves a breather.
“We believe that the acceleration of Rafale order intake is one of the main drivers of the Dassault share price since January 2023” and “we believe that the market is increasingly inclined to take into account the orders not confirmed, which is reflected in the increase in delivery forecasts from 2026″, she considers.
The establishment thus judges that the short-term upside potential is limited since the potential good news is therefore likely to have already been purchased by the market.
UBS also considers that a new large-scale order from the Indian Air Force should not arrive before 2025, because on the one hand the Indian Navy must already sign an order for 26 aircraft (an agreement of principle had been announced in July 2023) and India is, according to Janes.com, also discussing an order for 97 Tejas aircraft from local industrialist Hindustan Aeronautics.
In other words, the catalysts linked to the Rafale risk running out in the coming months.
Beyond the military branch, UBS considers that the risks for the group’s business jet division are more downward than upward. “The latest data suggests that growth in ‘bizjet’ airline activity continues to stagnate and that inventories of used aircraft are normalizing, which limits new orders for most aircraft manufacturers,” writes the Swiss bank .
“With the launch of the Falcon 6X late last year and the Falcon 10X planned for 2027, we see the market for long and ultra-long range aircraft becoming increasingly crowded, which likely means that Dassault will lag behind growth in the business jet market, dominated by peers Bombardier and Gulfstream,” the bank continues.
Julien Marion – ©2024 BFM Bourse
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