We have reiterated our Strong Buy recommendation on AerSale Corporation (Nasdaq: ASLE) (“AerSale” or “the Company”) and outlined several near-term catalysts that could nearly triple its current share price. We have held a significant long-term stake in the company and we believe it has a near-term price target of $45.90.
Our research cites two significant catalysts related to AerSale’s recent successful completion of all FAA certification flight testing for AerAware™, its pioneering Enhanced Flight Vision System (EFVS) that enables pilots to “see” through low visibility conditions:
- FAA approval of AerAware is imminent and is a near certainty. On August 21, ASLE announced that, after hundreds of hours of FAA flight tests spanning 4+ years, it had successfully completed the last set of tests for AerAware. The Company has stated that FAA approval typically comes within 30 days after completion of final flight testing. Based on this, Prescience Point expects the FAA to approve AerAware and issue a Supplemental Type Certification (STC) by no later than September 20. Once AerAware is approved, AerSale will be first-to-market with the only certified EFVS of its kind, giving the Company a monopoly over this massive market opportunity for several years.
- Shortly after certification, AerSale should receive several large initial orders for AerAware. Prescience Point expects the Company to receive several initial orders for AerAware upon FAA certification. Management has consistently stated that several large domestic airlines are interested in and have already flown multiple test flights with the product, including a major domestic airline that management expects to place a launch order of at least 250 units. Based on management’s description of the unidentified purchaser, it is likely that this launch customer is United Airlines. Furthermore, Prescience Point’s research indicates that both Southwest Airlines and Alaska Airlines have also flown multiple test flights with the product and will likely place large orders soon after the product is certified.
In addition to its positive outlook for AerAware, Prescience Point also expects growth in the core business to sharply reaccelerate. During its Q2 2023 earnings call, AerSale reported a significant increase in feedstock purchases during the first half of the year and projected that total feedstock purchases in FY 2023 would amount to ~$250 million, almost 5x the amount purchased in FY 2022. At the same time, the commercial aftermarket appears to be at the beginning stages of what is expected to be a multi-year bull cycle driven by a protracted shortfall in new aircraft deliveries. Given the record amount of feedstock it has recently accumulated on its balance sheet, AerSale’s core business is well-positioned to capitalize on this favorable industry environment.
Prescience Point estimates that the core business will generate Adjusted EBITDA of $93.3 million in FY 2024. Additionally, Prescience Point projects that AerAware will contribute an additional $62 million of Adjusted EBITDA in FY 2024 from the delivery of 250 units of the product. Based on this projection that AerSale will generate a combined total of $155.3 million of Adjusted EBITDA in FY 2024 and assuming a multiple of 15x, comparable to industry peers, Prescience Point values AerSale shares at $45.90. This represents a 194.4% premium to the current share price of $15.59.
“AerSale now has a clear runway to commercialization of its game-changing AerAware system,” said Eiad Asbahi, Founder and Portfolio Manager of Prescience Point. “We believe these imminent near-term catalysts will boost the Company’s share price to beyond $20 over the next 30-45 days. Over the next 12-18 months, we project AerSale shares will nearly triple to $45.90, driven by a significant ramp-up in AerAware sales, along with a sharp reacceleration of growth in the core business. This bullish outlook is supported by the actions of AerSale’s executives, who recently purchased a large amount of shares in the days following the most recent earnings report.”