EL AL | Market Reaction to Ceasefire Deal
Investors sell the news, not the thesis. EL AL’s fundamentals remain firm.
Disclaimer: As of the publish date, I hold a share of EL AL. This post is for information purposes only. I may buy or sell at any time without further notice. Not advice or a call to action.
EL AL’s stock is dropping today as the deal to end the Israel-Gaza war is finalized, leading to a sharp decline. A mix of factors drives the move:
Fears of renewed foreign competition at Ben-Gurion Airport.
Investors who held a trade based on the continuation of the war (or hedging in the local market) are now closing their positions.
Redirecting capital to different channels.
Bottom line, many are selling for various reasons, causing the share price to fall. I also recognize that there have been talks of Turkish Airlines returning to operating in Israel, and that Israeli consumers have short-term memory1, leading to high demand for the Turkish lines.
How do I act on a day like this? Not doing much. Most of the competition has already returned to Ben-Gurion Airport. EL AL is still in the midst of organizational change, including management changes, and a shift in the company’s capital structure from debt to surplus capital.
After two intense years, the return of foreign airlines may actually provide relief to employees and loyal passengers who have suffered from congestion, limited service, and ticket availability.
From a trading perspective, it might be an opportunity to shake things up and replace investors who held a position during the war with those who truly see the company's real value.
Thesis: EL AL is in a position that allows it to provide worthy competition to foreign airlines. In terms of results, what matters is the load factors (occupancy rates). Not market share, nor the average price of a flight ticket.
With its route network restructured and its financial arm (Matmid & Fly Card) expanding, the next stage is customer retention: preserving both loyal passengers and the large base of newcomers who joined during the war. The financial segment remains the key upside catalyst.
Along with the analysis, I hope that all the hostages will return home, down to the last one 🎗️. The past two years have been difficult for all of us as citizens of Israel, and for me personally, this may also be a real relief. I hope that we will achieve a full implementation of the agreement, ensuring that all hostages are back home and that everyone can begin their recovery journey soon.
Turkey’s Erdoğan compares Israel’s Netanyahu to Hitler at UN assembly (September 24, 2024)
Thank for the update!