Pareto downgrades Norwegian Air amid liquidity concerns

Shares of Norwegian Air tumbled on Friday as Pareto Securities downgraded its rating on the stock to ‘hold’ from ‘buy’, citing concerns about liquidity and the impact of the coronavirus.

Pareto, which slashed its price target on Norwegian to NOK15 from NOK50, said that with the spread of Covid-19, risks have "clearly" increased for airlines as demand fades.

"While the weakness is not yet reflected by traffic figures, equity value does, and cancelled flights is a signpost for dented earnings. And, NAS will be no exception," it said. "Albeit, the company hold a high share of leisure and this along with lower fuel prices should contribute positively. Early indications paint a bleak picture and unfortunately NAS’s liquidity buffer is slim."

Pareto cut its 2020 estimate to a net loss of NOK1.2bn from zero, and said that with risks mounting, new equity might be required for it to stay afloat.

At 1400 GMT, the shares were down 27% at €1.14.

On Thursday, Norwegian withdrew the 2020 guidance it provided to the market in February, citing uncertainty and reduced demand on the back of the coronavirus outbreak.

The airline, which had already cut its capacity by 15%, said it had decided to cancel 22 flights between Europe and the US due to reduced demand.