Why Shares of Azul Are Up Today

What happened

Shares of Brazilian airline Azul (NYSE: AZUL) were up more than 6% on Monday afternoon after a leading politician in Brazil talked up the effectiveness of a COVID-19 vaccine.

So what

Azul shares are down more than 60% year to date, but compared to other Latin American airlines, it has held up pretty well through the pandemic. The company seemingly has the capital and commitments in place to avoid a bankruptcy but is unlikely to rebound until the pandemic is over and traffic returns.

A plane landing at night.

Image source: Getty Images.

That could take years, but the stock got a boost on Monday thanks to comments by Sao Paulo Governor Joao Doria. The governor, according to Reuters, talked up the potential of a vaccine developed by Sinovac, saying initial data gathered during clinical testing in Brazil has been positive.

Sao Paulo is Brazil's economic engine. Improved confidence there would help keep Brazilian airline traffic numbers on an upswing, hopefully helping to fuel an airline recovery.

Now what

Shares of Brazilian airlines, like their U.S. counterparts, tend to trade up and down based on what is going on with the pandemic and the outlook for a resolution. There's some logic to it, but long-term investors would be better served by blocking out the day-to-day noise.

Azul appears well positioned to survive, but the stock is not going to get airborne until traffic returns. That's likely a year or more off, assuming quick progress on a vaccine. A politician's optimism is not going to make that recovery happen any quicker.

Given the prolonged timeline and the history of economic turbulence in Latin America that could complicate a recovery, I see no reason to rush in and buy ahead of a possible recovery.

10 stocks we like better than Azul S.A. American Depositary Shares
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Azul S.A. American Depositary Shares wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of September 24, 2020

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

In This Story


Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More