Upgrading LATAM to Strong Buy: Fleet Growth, Higher Yields and a Clear Path to Margin Expansion

Hook & thesis

LATAM Airlines (LTM) has quietly become one of the more compelling airline stories you can own. After emerging from restructuring, the company is posting profitability above pre-pandemic levels and is investing to expand capacity on high-yield long-haul routes. That combination - recovering demand in underpenetrated South American markets, a fleet renewal anchored by additional Boeing 787s, and consolidated pricing power - is enough for me to upgrade my rating to Strong Buy.

My trade plan is actionable and time-bound: enter at $64.82, place a hard stop at $58.00, and target $80.00 over a long-term horizon (46-180 trading days). The risk/reward is favorable given a market cap of roughly $19.6 billion, a trailing PE of ~13.1, and clear upside from higher unit revenues and modest multiple expansion if the company continues to convert demand into earnings.

What LATAM does and why the market should care

LATAM Airlines Group S.A. is the region’s largest airline group, offering both passenger and cargo services from its base in Santiago, Chile. It benefits from a geographically advantaged network that links under-penetrated domestic and regional markets to long-haul international flows. For investors the key points are straightforward: LATAM has the scale to control capacity on essential South American routes, is expanding long-haul widebody capacity with 787s to capture higher-yield international demand, and is operating with margins that have exceeded pre-pandemic levels.

Hard numbers that back the case

Two items stand out: first, the company’s trailing PE of ~13 puts it in a value territory relative to many global carriers that are trading on higher multiples because of stronger cash positions or more predictable domestic demand. Second, LATAM’s 52-week low of $26.36 (which reflects the post-restructuring volatility) offers context for how much of the recovery is already priced in - the stock is closer to the top of that range at ~$64.82 with meaningful upside to my $80 target.

Recent operational and strategic catalysts

• The company placed an order for 10 additional Boeing 787 Dreamliners (reported 10/28/2024). That fleet expansion provides capacity to take share on long-haul, high-yield markets while improving unit economics versus older widebodies.
• Analyst commentary and internal trends point to "higher for longer" earnings driven by above-average passenger growth in underpenetrated South American markets (reported 10/01/2024).
• LATAM maintains a modest yield cushion: the dividend yield sits at ~2.35% and management has already started returning value to shareholders with scheduled payouts (payable date 01/09/2026; ex-dividend 12/17/2025).

Technicals & positioning

Momentum indicators are constructive but not euphoric. The 10-day SMA is $65.82, 20-day SMA is $63.03, and the 50-day SMA is $57.05. The RSI at ~62 suggests healthy buyer interest without being overbought. MACD shows a slightly bearish histogram (-0.33) with the signal line above the MACD line, implying short-term consolidation rather than a reversal. Short interest is low in absolute terms with days-to-cover under 3 on the latest reading, which reduces the risk of a forced squeeze volatility spike.

Valuation framing

At a market cap of ~$19.6 billion and a PE of ~13, LATAM is priced as a mid-cycle airline with some credit of improved earnings but still below the multiples of better-capitalized peers. The company’s PB ratio of ~13.8 is unusually high for airlines, a number that must be interpreted alongside the fact that LATAM trades as an ADR structure and has a different equity basis than many domestic peers. If LATAM’s unit margins continue to expand and management converts fleet investments into higher-margin international revenue, the stock can reasonably re-rate toward a PE in the high teens, which supports my $80 target over the next 46-180 trading days.

Catalysts to drive the trade

• Fleet deployment - The Boeing 787 order accelerates capacity on high-yield long-haul routes; successful redeployment will drive higher unit revenues.
• Seasonal demand strength - Continued outperformance in international travel and business segments in South America should push yields higher in coming quarters.
• Margin expansion - Continued operating leverage as load factors normalize will show up in quarterly results and guidance upgrades.
• Shareholder returns - A steady dividend and potential buybacks as free cash flow improves would support multiple expansion.

Trade plan (actionable)

Entry & rationale: Enter at $64.82. This is essentially the current market price and captures the stock after the recent run toward the 52-week high while still offering a sensible stop and upside.

Stop loss: $58.00. A break below $58 would indicate a loss of near-term technical support (below the 20-50 day blended momentum) and weaken the thesis that demand and yield improvements are sustainably translating into profits.

Target: $80.00. This price implies roughly 23% upside from the entry and reflects a multiple expansion toward the high-teens PE range combined with continued EPS growth from higher yields and better fleet economics.

Horizon: long term (46-180 trading days). This trade allows time for fleet deployments to take effect, for at least one to two quarterly results to show margin improvement, and for investor sentiment to re-rate the stock. I also will tolerate short-term volatility tied to macro headlines or fuel price moves.

Risk profile - Medium

This is not a risk-free position. Airlines carry operational exposure to fuel, currency swings, and cyclical demand. My stop is tight enough to limit downside but wide enough to accommodate normal volatility.

Counterarguments to my thesis

• Macro shock - A global demand shock or sudden deterioration in South American economies could undercut passenger volumes and yields, invalidating the case for a higher multiple.
• Execution risk on 787 rollout - New widebody capacity could take longer to reach profitable utilization, especially if pricing competition intensifies on key international routes.

Risks (at least four)

• Fuel & currency volatility - LATAM is exposed to jet fuel prices and regional currency moves; either can compress margins rapidly.
• Competitive capacity responses - Rivals could flood major routes with capacity, pressuring fares and lengthening the time it takes LATAM to convert fleet additions into higher margins.
• Macroeconomic slowdown in South America - Slower GDP and business travel recovery in the region would directly hit top-line passenger volumes and corporate travel demand.
• Operational disruptions - Weather, regulatory actions, or other operational issues (including delivery delays or technical problems with new aircraft) could dent revenue and investor confidence.
• Valuation sensitivity - If investor sentiment shifts away from cyclical recovery narratives, LATAM’s valuation could compress despite improving fundamentals.

What would change my mind

I would downgrade the rating if quarterly results show persistent margin deterioration (declining unit revenues and widening unit costs), if management signals significant delays or write-downs on the 787 program, or if liquidity metrics weaken materially (e.g., a meaningful increase in net debt or inability to fund operating cash needs without dilutive measures). Conversely, a clear beat-and-raise operational quarter, an acceleration of international load factors, or aggressive buyback/shareholder return announcements would reinforce the Strong Buy and likely accelerate my price target timeline.

Conclusion

LATAM checks the boxes for an actionable long trade: an earnings recovery that is already visible, a fleet strategy that should improve unit economics, a reasonable current valuation with room for multiple expansion, and a clear entry/stop/target that defines risk. I’m upgrading to Strong Buy and will initiate positions at $64.82 with a stop at $58 and a target of $80 for the long-term window of 46-180 trading days. Keep an eye on quarterly margin progress and the pace of 787 deployments as the primary catalysts and watch fuel/currency moves as potential derailers.

Quick reference

• Entry: $64.82
• Stop: $58.00
• Target: $80.00
• Horizon: long term (46-180 trading days)
• Risk level: medium