Embraer Trading at Record Lows

Embraer Trading at Record Lows

Embraer is currently trading at a range which is the lowest the stock has ever gone before. The outbreak of COVID-19 has directly affected the entire aviation and travel industry as a whole.

Embraer is known internationally for its Regional Airlines and its Business Aviation models. Their aircraft have gained the attention of businesses and airlines around the world for their sleek design and reliable service.

Embraer is based out of Brazil and their direct market has not experience a dramatic increase in confirmed cases as compared to other location in the world. The company has recognized the global effects that the pandemic has and has taken dramatic steps as a company to ensure the longevity of the company is maintained.

The factory workers have accepted conditions to be able to continue working with reduction to their salaries. This allows for the factory to remain open and operational. Through a partnership created with Albert Einstein Hospital located in São Paulo, Brazil, Embraer is developing biological air filter systems which can be used in hospital environments.

Being able to quickly adjust their production systems to benefit the local community was an adjustment that was quickly made and allowed for Embraer to continue to serve its nation and world by remaining open.

The stock is currently trading at just around $6.5 a share. From its previous highs of just over $40 a share lets take a quick look at the business outlook for Embraer and the companies placement for a recovery.

Various Sector of the Business

Embraer has done a great job at diversifying their products and services which they offer. Their commercial airline business recently launched the E195-E2 also known as the Profit Hunter which is an innovative aircraft designed for high profit margins of operating. This aircraft has started to attract the attention of many airlines when they started the discussion of adding new aircraft into their fleet.

Now as times change and many airlines are reducing and redesigning their fleet to serve a new mission the potential for new orders to be placed is a bit higher. Many airlines may be looking to sell off older models in their fleet to upgrade to newer more efficient aircraft.

Executive Aviation

Embraer continues to advance and develop their product line of business and executive jets. The Phenom 300E recently received ANAC, EASA and FAA approval. This is the fastest and longest-range single-pilot jet that is capable of flying at Mach 0.80.

Being the most enhanced version of the 300 Series which launched in 2010s, the aircraft is a marvel in the light jet category. With an intracontinental range of 2,010 nautical miles (or 3,723 km, considering NBAA IFR reserves with 5 passengers), a high-speed cruise of 464 ktas, a maximum payload of 2,636 lb (1,196 kg), a takeoff distance of only 3,209 ft (978 m) and an unfactored landing distance of 2,212 ft (674 m).

This new model is expected to satisfy the specific needs of the responses from guests feedback. The greatest additions are the technology being implemented in the aircraft that will set it aside from many competitors. With many businesses looking to potentially start travelling privately Embraer is looking to meet that demand over the next decade.

Defense & Security

With their largest customer being the Brazilian government Embraer similar to many other aerospace companies provide services and technology to the government for specialized missions. Their most recently certified KC-390 they aim to be able to satisfy orders within their own nation and for foreign governments.

Being the main aerospace and defense contractor in Latin America they are able to provide services to various contries in the region. Their A-29 provides for light attack and advanced training while their C-390 is a premium military airlift. Their technology and equipment has been implemented in the defense and security divisions of over 60 countries.

Many of these countries will need services and support for their technology and Embraer is focused on being able to provide those services when needed. This being another large portion of their business.


Is a projected designed to build the next generation of mobility. Creating a network of Urban Air Traffic Management is an element that will be essential for the implementation and adoption of electric Vertical Take off and Landing Aircraft (VTOL).

With the goal of creating the impossible reality by 2030 Embraer has put together a team focuses in creating sustainable future for aviation. With the idea of social distancing being the highlight for Q1 2020 there are predictions that these habits may stick for quite some time.

VTOL offer individuals the accessibility and freedom to travel quickly and efficiently regardless of where they are in the city. With load limitations based on weight and size many VTOL designs have limitation regarding payload. As many customers are looking to maintain their space and privacy the market may be looking for quick solutions to their intercity mobility conflicts and Embraer hopes to solve that issue.

This technology is still in testing phases and there are many concepts and ideas on this topic which are still in testing. The potential for this market to flourish are still not clear as this is new technology that has yet to be taken to market.

Technical Analysis

The price range for Embraer (ERJ) has been strong for the last decade as price moved very consistently within its trading range.

After the outbreak of COVID-19 the stock took a massive plummet going down to under $7 a share. The company has yet to report significant losses. They have not seen any cancelled orders come in yet for pending orders. They are still servicing their active fleet which is currently flying around the world in both the commercial, executive and military sectors.

All in all the company is located in a sector of the world that has not had the same levels of Coronavirus cases as many other countries in the world. They have managed to come to an agreement with their staff to keep the factories open to be able to keep productions moving.

The stock fell due to the side affects and sell off of aviation relation stocks. There has been little factual information to support the sudden drop in stock value outside of the COVID-19 outbreak. Considering that ERJ is trading at a major low there is little risk associated with entering in on long positions for ERJ.

Taking on a few positions for the stock can be done so for under $7 a share right now. With the average trading range of the stock being between $20 and $35 a share this means that there is a potential of gaining around 200% in holding the stock until its standard trading range.

If looking to add on long Call positions you could go out 6 months or more. The calls are currently trading for a low price considering that implied volatility is low and Probability of the option being In the money are low. When purchasing options with low probability of being ITM the value of the options contract is relatively low. As the probability of the options being ITM goes up so does the value of the option contact.

Should you anticipate for ERJ to continue to drop down lower then the Put options will provide you with the right to sell the stock at a specific stock price. The choice at the end of the day is yours.

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf

Air Market Group content is provided solely by Air Market Group LLC and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction, or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. Air Market Group, through its content, financial programming, or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon, or risk tolerance. Air Market Group is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. Multi-leg option strategies incur higher transaction costs as they involve multiple commission charges. Air Market Group is not a licensed financial advisor, registered investment advisor, or registered broker-dealer. Options involve risk and are not suitable for all investors. Please read the Characteristics and Risks of Standardized Options before deciding to invest in options.

Success! You're on the list.

Donations from readers like you help keep this blog running. We appreciate your support!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: