Azul SA (AZUL) is primarily involved in air transportation services. The company offers airline passenger and cargo services. It operates daily flights departing from Fort Lauderdale and Orlando and also schedules flights to more than 100 destinations through Brazil.
The company has been benefiting from a recovery in air-travel demand. This is especially true on the domestic front. AZUL’s traffic in August surged 176.9% year-over-year. It is also up 6.5% from its August 2019 level. In addition, an increase in e-commerce demand is boosting the company’s cargo business unit.
As of the most recent quarter, the company had $814 million in cash, up from $429 million in the previous quarter, and well above its short-term debt level of $47 million. However, analysts forecast earnings to fall 151.4% year-over-year in the third quarter.
The stock also appears overvalued with a forward P/E of 38.91. AZUL was showing bearish momentum from late June to late August, but performance has been mixed since, as shown in the chart below.
Take a look at the 1-year chart of AZUL below with my added notations:
Chart of AZUL provided by TradingView
AZUL has formed key support at around $19 (green) over the past several weeks. In addition, the stock is also declining against a down trending resistance line (red). These two lines have AZUL trading within a common pattern known as a descending triangle. Eventually, the stock will break out of it.
A descending triangle is a bearish pattern. A short trade could be made on a break of the $19 support level with a protective stop placed above the entry point.
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AZUL shares were trading at $19.07 per share on Thursday morning, up $0.18 (+0.95%). Year-to-date, AZUL has declined -16.43%, versus a 18.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...
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