Citigroup upgrades Airbus stock rating to Buy and raises the target price, leading to a stock price increase

Airbus stock rose on Thursday after Citigroup upgraded the European aerospace group from Neutral to Buy and raised its target price, believing that despite delays in delivery volume increases, the long-term profit outlook remains strong.

Citigroup raised the target price from €208 to €217, citing improving prospects across multiple business areas. The analyst said the upgrade reflects a combination of factors, including long-term aircraft production growth, a strong defense business, and favorable currency trends.

As of 11:37 a.m. GMT on Thursday, the stock was up 2.1%.

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Citigroup analyst Charles Armitage said that although the increase in aircraft deliveries has been delayed, the long-term production trajectory remains unchanged. Airbus is still expected to reach a monthly production rate of 75 narrow-body aircraft, supported by a strong order backlog.

Additionally, he believes the outlook for Airbus’s defense business is improving, especially as European Typhoon fighter jet production increases and European rearmament drives demand for military helicopters.

A strengthening US dollar against the euro is also expected to provide support. Citigroup estimates that exchange rate movements could add about €8-10 per share to the company’s valuation.

Armitage acknowledged that short-term delivery performance has been weak, with January data particularly low, and February is expected to remain subdued. However, production indicators seem to be improving. The analyst noted, “First flight (better production metrics) is improving, and we expect deliveries to follow.”

Although he has lowered near-term operating profit forecasts by about 10-11% due to slower delivery growth, he said that with production catching up and favorable currency trends, the long-term outlook is now higher.

He also believes concerns that geopolitical tensions could impact air travel demand may be exaggerated, and pointed out that rising oil prices could actually encourage airlines to replace older aircraft, as modern jets typically save 15-20% on fuel costs.

Armitage wrote, “Modern aircraft save 15-20% on fuel — fuel accounts for about 30% of airline operating costs, which is very attractive.” He added that when fuel prices rise, the economic case for purchasing new aircraft often strengthens.

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