The steep drop in El Al Israel Airlines Ltd.'s (TASE: ELAL) share price was halted today ahead of publication of the company's third quarter results tomorrow. The recent strong negative trend had pushed El Al's share price down 60% from its peak of just under a year ago yesterday but this afternoon the share price was up 6.80%. Even so since the company announced the resignation of CEO David Maimon earlier this month, the share price has fallen 6.2%%.
The airline has lost NIS 1.1 billion in market cap, and is currently valued at NIS 760 million, compared with NIS 1.9 billion in October 2016. The share was plunging even before Maimon's resignation, and had lost 25% of its value within a month, following a significant rise in oil prices, which have risen to levels not seen for a long time.
To these falls were added the negative sentiment that has accompanied trading in El Al's share since August, when the company published disappointing second quarter results, resulting in a plunge of nearly 20% in two days and completing a halving of its value in just three months.
"The next report will be poorer than in 2016"
Psagot Investment House Ltd. analyst Noam Pinko writes, "The falls in the share have already exceeded what is economically justified. The momentum in negative sentiment is already more psychological than anything else. The CEO's resignation, which is another factor increasing uncertainty in the company, certainly did not help change the direction."
Commenting on the airline's upcoming financial reports, Pinko added, "The third quarter is considered strong for El Al, but the upcoming report is expected to be poorer than the corresponding quarter last year, because there were fewer passengers this September on account of the timing of the holidays, and the dollar exchange rate and higher oil prices will also affect the results.
"In the short term, the share will continue to be very volatile. It is hard to predict which way it will go. In the long term, however, we remain positive about it, due to the increase in the number of people flying in Israel, while ticket prices are no longer falling."
The share price of Knafaim Holdings Ltd. (TASE: KNFM), through which Tamar and David Borowitz control El Al, together with Zabludowicz, shows a similar trend, with a 10% fall since Maimon's resignation, and a 50% drop since last May's peak.
Even in calmer periods, El Al's shares is regarded as relatively volatile, with a substantial trading turnover by Tel Aviv Stock Exchange (TASE) standards. An examination of the company's shareholders helps to explain this. Parties at interest hold 43% of El Al's shares, investment institutions 6.5% (mainly The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5)), and the public owns 50%, probably including hedge funds, day traders, and short-term private players.
Taking longer periods into account, El Al's share has still been a standout on the TASE, with impressive returns of 250% over the past three years and 340% over the past five years. Over the past decade, however, the share has lost 15% of its value.
Published by Globes [online], Israel Business News - www.globes-online.com - on November 21, 2017
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