AerSale (NASDAQ: ASLE) results fell short of expectations, and it is still unclear when the company might see a revenue boost from a promising new product.
Investors reacted by heading for the exits, sending AerSale shares down 10% as of 1:30 p.m. ET.
A tough market for buyers and sellers
AerSale is primarily a buyer and seller of used airplanes, engines, and aerospace parts, but the company has caught the attention of investors of late because of its AerAware technology that provides better pilot vision in older cockpits.
The latest quarter provided disappointment on both fronts. AerSale lost $0.07 per share on revenue of $77.1 million, short of the $0.10-per-share profit on sales of $87 million Wall Street had expected, on fewer asset sales and investment in maintenance facilities.
The company also said it has yet to receive an initial order for AerAware, but that discussions are continuing with four potential airline customers. AerAware received Federal Aviation Administration certification in December 2023 after a protracted application process, and investors had hoped the approval would mean a new source of higher-margin revenue.
Is AerSale a buy?
The core miss should not worry investors. AerSale is investing in its future by adding to its maintenance operations, and used equipment is a volatile business. The revenue shortfall is in part due to AerSale being a disciplined buyer in a tight market.
The AerAware question is a little trickier. The sales cycle is likely longer than many investors had expected, in part because of the challenges of bringing new equipment online on an airplane and the impacts on pilot training. The product still makes sense for a lot of operators of older aircraft, and AerSale has 150 completed kits ready to ship if and when a deal is finalized, but the timing is far from certain.
For investors considering whether to buy in now, AerSale's core business is off to a good start to the third quarter with strong engine work in July and appears likely to rebound in the second half. The bull case for AerSale is that aircraft maintenance and spare parts are likely to remain in demand for the foreseeable future. Anything that comes from AerAware is an added bonus.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AerSale. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
