Copa Airlines, The “Hub of the Americas”

Copa Holdings Financial Highlight

Copa Holding (NYSE: CPA) ended the day yesterday with a strong 4th quarter financial report. After the results were announced for not only the 4th quarter but 2019 as a whole the stock jumped up nearly 4% after hours.

Although the financial report that has been release is preliminary and is subject to revision after the financial statements have been audited the numbers that came it show a significant year over year improvement for the company.

During the 4th quarter Copa Holding reported a net profit of $2.7m and earnings per share (EPS) at $0.06, which is a significant improvement from the net loss of $155.8m from 4th quarter 2018. When we look back at the entire year of 2019 the company finished off with a net profit of $247 Millions which is a dramatic growth from the net profit of $88.1 million for the entire year of 2018.

Copa Airlines’ goal is to continue to grow profitably and enhance our position as a leader in Latin American aviation by providing a combination of superior customer service, convenient schedules and competitive fares, while maintaining competitive costs.

Seeing the dramatic improvement in the companies overall revenue for starters just gives us an initial perspective that the company is performing stronger year over year.

When we look at items such as operations for Copa in 4Q19 they generated a profit of $17.8m in comparison to the loss of $126.4 in operation form 4Q18. The entire details of the earnings report can be found and downloaded directly from the companies website.

Fundamental Approach

Image by Copa Airlines

Copa Holdings (NYSE: CPA) is the proud parent company of Copa Airlines Copa Colombia. Copa Airlines has a long running history that dates back to 1947 when Panamanian investors and Pan American World Wide Airways teamed up their technical and operational expertise with accessible capitol.

From their humble beginnings with three Douglas C-47 aircraft to their current fleet of 105 aircraft, Copa airlines has shown their ability to be a leader provider in Latin America. Providing both passenger and cargo operations with a network of regional and international flights their business tactics have shown to provide results.

Copa operates over 360 daily flights between 80 different destinations between 32 various countries. Through their code-share agreements Copa is able to expand their network to an additional 200 destinations primarily through United Airlines (NYSE: UAL).

Some of the key factors that Copa takes pride for is their location. Being located in Panama City, the “Hub of the Americas” they are in a prime location to provide service to North, South, Central America and the Caribbean. Economic factors in Panama such as their financial services, dollar-based economy, free-trade zone and sprawling tourism create a haven for growth.

We intend to continue to focus on satisfying our customers and earning their loyalty by providing a combination of superior service and competitive fares. 

Copa Airlines

Copa Airlines believes that much of their success comes from their ability to operate efficiently. Using a modern and efficient fleet helps save costs not just for the airline but also for their guest. With newer aircraft in their fleet they are able to save less on maintenance and keep their aircraft flying. As we all know an aircraft on the ground doesn’t make any money!

Technical Analysis

This chart has been in a very consistent upwards trending channel for the last 2 years. The price action is ranging between the lower zones of the Fibonacci channel. We are still currently in the lower bracket of the total range.

The previous highs from 3 years back show the history of where the stock has been. As 2018 reports came out showing a weaker year the price of the stock dropped dramatically. This dropped allowed from price to create a new support level.

Currently the financial analysis reviewing Copa airlines have given the stock a value rating of $122 which means the stock is currently being sold at a price under its value. When entering long positions many investors would prefer to purchase a stock that has is below its analyst target price.

Now that we have determine the high of the stock and the most recent support level near the bottom of the range, the next step is to determine the most probable next outcome. Price has tested up above the first price level on the channel once before and has failed to be able to break above.

With the most recent earnings report, broadcasting the significant increase in revenue from the previous year we can expect to see more buyers enter the market. Just looking at yesterday after the close of the market, the stock rose up nearly 4%. The potential for the stock to climb up another 4% for example is extremely plausible.

In the same note, stocks on earnings day have a tendency to climb rapidly in the first few moments of the market being open to then reach a level where investors begin to feel euphoria. As the price continues to climb and a sudden fear enters that the stock will climb investors will rush to secure profits.

As a result as sell orders start to fill the order books the market begins to think that the rise of the stock is over and then others will follow the herd mentality to then sell their own positions in the stock, only continuing to drop the price even more.

Earnings reports can often be quick intense to follow live as investors psychology will dramatically impact the price of the asset. Many large institutions will time out their orders over multiple days to prevent from sudden spikes in the market.

Copa will be opening today up from the close of yesterdays trading session. Today we will be able to see the market respond to the report of their 2019 earnings. Overall with the report showing optimism we can look to see the stock respond accordingly.

None the less we can never fully predict or anticipate what the market will do so taking the proper precautions when investing is necessary.

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