Noble Capital initiates on aviation hangar builder Sky Harbour, TP implies 80% upside
Noble Capital Markets thinks shares of Sky Harbour are significantly undervalued. / Photo: Skyharbour.group
Shares of Sky Harbour Group, a small-cap developer of premium hangar campuses for business jets, should trade 80% higher than current market prices, according to investment bank Noble Capital Markets. The valuation, laid out by Noble in an initiation report, is driven by a highly profitable business model, access to low-cost financing, and steady demand.
Details
Noble values Sky Harbour at $23 per share, implying 80% upside versus current quotes. The stock closed at $12.09 per share on Friday, May 16.
Noble has assigned the stock an “outperform” rating, equivalent to a “buy” recommendation.
Noble’s case
Noble identifies three key factors that should support the company’s long-term growth:
High-margin leasing model. Most U.S. airports are municipally owned and have limited capacity to invest in business aviation infrastructure. Sky Harbour leases land from airports — often at rates below $1 per square foot per year — builds hangars on that land, and then rents them to tenants at rates up to 40 times higher, Noble explains. The company also manufactures its own prefabricated steel, which allows for cost control and a robust supply chain.
Access to low-cost financing. Sky Harbour is authorized to issue private activity bonds (PABs), a tax-exempt financing option typically used for infrastructure projects like hospitals and airports. The company announced at the LD Micro conference in April that it plans to issue $150 million in PABs in 2025.
Rising demand for business aviation infrastructure. For the decade to 2033, business aviation operators are expected to purchase around 8,500 new jets, worth $278 billion, according to engine manufacturer Honeywell. This trend will drive demand for new hangar construction.
About Sky Harbour
Sky Harbour builds campuses of private hangars, office, lounge, and parking, with fully-dedicated, personalized line services, according to its website. Founded in 2017, the company has been expanding rapidly: In mid-2023, it had only seven lease agreements with airports, which has now grown to 17, according to Noble. Recently, the company announced a development agreement for a new campus at Trenton-Mercer Airport in New Jersey.
In the first quarter, Sky Harbour reported a 133% year-over-year increase in revenue to $5.6 million. Its net loss shrank 57% to $9 million. Adjusted EBITDA remained negative at $3.3 million. Note that the company expects to reach breakeven on this metric later this year.
Stock performance
According to MarketWatch, Sky Harbour stock currently has four “buy” ratings and one “hold” from Wall Street coverage analysts. Their average target price is $18.20 per share, implying upside of more than 50% versus current quotes.
