Mike,
One would hope you would not succumb to the “Department of War” monicker for what is legally—still—the Department of Defense. Bob Distler From: Mifnet Admin via Mifnet <[email protected]> Sent: Sunday, 01 March, 2026 15:42 To: [email protected] Cc: Mifnet Admin <[email protected]> Subject: [Mifnet 🛰 75574] Heard in the Hangar #328 Why we are maintaining price target of $185 on RKLB and raising price target on FTAI to $700 from $605 Israel and the United States launched a joint attack on various cities in Iran codenamed Operation Epic Fury by the US Department of War and Roaring Lion by Israel. The initial attacks targeted key officials, military commanders and facilities, including the compound of Supreme Leader Ali Khamenei killing him and his family. In retaliation, Iran landed dozens of ballistic missiles across the Middle East targeting Israel, Jordan, Syria, Kuwait, Bahrain, Qatar, Saudi Arabia and the United Arab Emirates. According to President Trump, the objectives of Operation Epic Fury was to destroy Iran’s missile and military capabilities, prevent Iran from obtaining nuclear weapons, and allow the Iranian people to topple the regime and install new leadership. Trump called on the Revolutionary Guard Corps (IRGC) to lay down their arms in exchange for immunity, warning that refusal would mean “certain death.” Our favorite Space Race 3.0 ideas in order are: 1. Planet Labs PPC 2. Rocket Lab Corporation 3. L3Harris Technologies 4. Intuitive Machines 5. Northrop Grumman Corporation Rocket Lab ( RKLB $69.10) reported a record-breaking year financially and operationally, flying 21 missions across Electron and HASTE with a 100% success rate for the year, and reached significant qualification milestones in the development of Neutron, its new medium-lift launch vehicle. The company updated the Neutron development schedule following the stage 1 tank test failure, with Neutron’s first launch now targeted for the fourth quarter of 2026. With a backlog of over $1.85 billion under existing businesses, it is not unreasonable to expect breakeven EBITDA by 2027 and free cash flow generation by 2028, assuming Neutron begins its first test service in 2026. We updated our DCF model and maintain our intrinsic equity value of $185 – a fraction of SpaceX’s $1 trillion expected valuation for its upcoming IPO. See pages 3-8 in attached pdf. The main risks are execution and delays in Neutron launch. Meanwhile, back on Earth…our favorite global airline ideas in order are: 1. Delta Air Lines 2. United Airlines Holdings 3. Southwest Airlines 4. Alaska Air Group 5. JetBlue Airways 6. Volaris 7. Ryanair Holdings plc. 8. American Airlines Group 9. Allegiant Travel Company FTAI Aviation(FTAI $305.80), our favorite idea in Aviation Services, delivered exceptional results in 2025, driven by continued demand for its Aerospace Products business. The company raised its guidance for 2026 driven by expanding production capacity and key initiatives, including the next Strategic Capital partnership and launch of FTAI Power. We are increasing our price target to $700 from $605 incorporating FTAI Power and higher EBITDA from Aviation Leasing and Aerospace Products. Our sum-of-the-parts analysis includes FTAI Power as a new segment – assigning a 20x multiple on 2028 Power EBITDA of $420 million, resulting in a contribution of $81 per share. Our new price target assumes 12x 2028E Aviation Leasing EBITDA vs 10x previously on higher EBITDA, and 35x 2028E Aerospace Products EBITDA. The implied 2028 P/E of 40x is comparable to peers Howmet and HEICO. The main risk is execution. See pages 13-16 in attached pdf. Volaris ( VLRS $8.62) stock pulled back from $10.50 to $8.50 after the killing of cartel leader “El Mencho” which sparked road blockades, vehicle burnings, and security operations in parts of Jalisco and surrounding states. Volaris confirmed that all its operations, including those at Guadalajara and Puerto Vallarta airports were running normally. Management respond quickly to changing geopolitical and industry dynamics last year by controlling unit costs, maintaining a load factor in the 85% range, and net debt-to-LTM EBIDAR ratio of 3.1x. Our price target of $19 assumes Volaris and Viva Aerobus merger is approved. See page 17 – 21 in attached pdf. If the deal is not approved, it is not unreasonable for the stock to trade up to $19 in three years based on 13x estimated 2029 EPS of $1.46. The main risks are geopolitical events and approval of Viva Aerobus merger. Joby Aviation (JOBY $10.06) is our favorite eVTOL idea, with Archer Aviation(ACHR $7.12) a longer-term idea. We updated our DCF model on Joby but are maintaining our intrinsic value of $37. We now assumes $40B in revenue by 2040, with 35% EBITDA margin and 828 aircraft in service. Our WACC of 10% reflects Joby’s convertible note which lowered cost of capital materially and our terminal growth rate of 5% assumes significant total addressable market expansion for eVTOLs over the next 20 years. See pages 23 – 27 in attached pdf. The main risks is government approval. Also in this issue of Heard in the Hangar are our takeaways on RKLB, PL, LUNR, LHX, NOC, FTAI, VLRS, AAL, FLYYQ, JOBY and ACHR.
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