What Happened?
Shares of aircraft leasing company FTAI Aviation (NASDAQ:FTAI) jumped 8.4% in the morning session after Chromalloy received FAA approval for its PMA (Parts Manufacturer Approval) CFM56 5B/7B High Pressure Turbine (HPT) 1st Stage Vane. To level set, replacement parts for aircraft engines typically come from the manufacturer or OEM, and these parts can be quite expensive. Competitors offering alternatives can't just develop and sell them. They must get FAA approval first in order to ensure that these parts meet safety and performance standards.
Chromalloy just got this approval for a part (a turbine vane). This means that FTAI, which makes money by maintaining, repairing, and overhaul aircraft engines, can now buy these parts for a cheaper price. Its even more important given the current environment of supply chain constraints and bottlenecks.
Benchmark Capital, which has a $300 price target on FTAI, noted that the development adds "rocket fuel" to FTAI's already successful Module Factory (a proprietary approach to maintaining and repairing aircraft engines that is more timely and cost-effective). Benchmark analyst Josh Sullivan added, "This event marks a seismic shift in the multi-billion-dollar jet engine aftermarket industry and is the cornerstone of FTAI's long-term strategy - FTAI is gaining this unmatched advantage in an engine aftermarket desperate for parts as OEMs struggle to ramp."
In addition, Wall Street research firm Barclays raised its price target on the stock to $135 from $110. While the new price target is below where shares are currently trading, it shows that Barclays is more constructive on the business and its fundamentals.
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What The Market Is Telling Us
FTAI Aviation’s shares are quite volatile and have had 16 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock gained 9.2% on the news that a Stifel analyst upgraded the stock's rating from Hold to Buy and raised the price target from $69 to $132. The new price target implied a potential 16% upside from where shares traded before the upgrade was announced. The analyst added, "The stock is worth buying given industry dynamics, even if considered expensive."
FTAI Aviation is up 216% since the beginning of the year, and at $143.28 per share, it is trading close to its 52-week high of $148.09 from October 2024. Investors who bought $1,000 worth of FTAI Aviation’s shares 5 years ago would now be looking at an investment worth $8,779.
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