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Gol Linhas Grapples With Coronavirus Woes: Time to Dump?
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Gol Linhas Aereas Inteligentes is taking a significant hit from the coronavirus pandemic. The carrier’s passenger revenues declined approximately 47% year over year in the first half of 2020 due to the coronavirus-led slump in air-travel demand. Although passenger demand has increased after having bottomed in April, it is still substantially below year-ago levels. With passenger revenues accounting for the bulk of the top line, total revenues are under significant pressure. For the third quarter, the airline anticipates revenues to decline approximately 73% year over year.
As the carrier has international exposure, depreciation of Brazilian Real against the U.S. dollar poses a challenge to the company. As has been the case in 2019, this currency headwind hurt the company’s first-half 2020 results as well. Rising total unit costs due to reduced capacity (the carrier has reduced capacity significantly due to low air-travel demand) is another headwind. Evidently, during the second quarter, cost per available seat mile (“CASK”) soared more than 200% year over year due to 44.4% reduction in aircraft use. Excluding fuel, the metric surged more than 300%.
Additionally, Gol Linhas has a weak liquidity position. At the end of the second quarter, the company had cash and cash equivalents of R$415.89 million, much lower than the short-term debt of R$3.85 billion. This implies that the company does not have enough cash to meet its short-term debt obligations.
Primarily due to the coronavirus-related woes, shares of Gol Linhas have plunged 58.6% in the past six months against the industry’s decline of 44.3%.
The pessimism surrounding the stock is evident from the Zacks Consensus Estimate for 2020 bottom line being pegged at a loss of $5.63. Moreover, the estimate has been revised upward in the last 60 days from a loss of $5.48.
In view of these negatives, we believe investors would do better by discarding Gol Linhas stock from their portfolios now, as is suggested by its Zacks Rank #5 (Strong Sell).
Shares of Canadian Pacific, Knight-Swift and Werner Enterprises have rallied 17.2%, 24.6% and 24.4% so far this year respectively.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
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Gol Linhas Grapples With Coronavirus Woes: Time to Dump?
Gol Linhas Aereas Inteligentes is taking a significant hit from the coronavirus pandemic. The carrier’s passenger revenues declined approximately 47% year over year in the first half of 2020 due to the coronavirus-led slump in air-travel demand. Although passenger demand has increased after having bottomed in April, it is still substantially below year-ago levels. With passenger revenues accounting for the bulk of the top line, total revenues are under significant pressure. For the third quarter, the airline anticipates revenues to decline approximately 73% year over year.
As the carrier has international exposure, depreciation of Brazilian Real against the U.S. dollar poses a challenge to the company. As has been the case in 2019, this currency headwind hurt the company’s first-half 2020 results as well. Rising total unit costs due to reduced capacity (the carrier has reduced capacity significantly due to low air-travel demand) is another headwind. Evidently, during the second quarter, cost per available seat mile (“CASK”) soared more than 200% year over year due to 44.4% reduction in aircraft use. Excluding fuel, the metric surged more than 300%.
Additionally, Gol Linhas has a weak liquidity position. At the end of the second quarter, the company had cash and cash equivalents of R$415.89 million, much lower than the short-term debt of R$3.85 billion. This implies that the company does not have enough cash to meet its short-term debt obligations.
Primarily due to the coronavirus-related woes, shares of Gol Linhas have plunged 58.6% in the past six months against the industry’s decline of 44.3%.
The pessimism surrounding the stock is evident from the Zacks Consensus Estimate for 2020 bottom line being pegged at a loss of $5.63. Moreover, the estimate has been revised upward in the last 60 days from a loss of $5.48.
In view of these negatives, we believe investors would do better by discarding Gol Linhas stock from their portfolios now, as is suggested by its Zacks Rank #5 (Strong Sell).
Key Picks
Some better-ranked stocks in the broader Transportation sector are Canadian Pacific Railway Limited (CP - Free Report) , Knight-Swift Transportation Holdings Inc (KNX - Free Report) and Werner Enterprises Inc (WERN - Free Report) . While Knight-Swift sports a Zacks Rank #1 (Strong Buy), Canadian Pacific and Werner Enterprises carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Canadian Pacific, Knight-Swift and Werner Enterprises have rallied 17.2%, 24.6% and 24.4% so far this year respectively.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>