Why I'm Trimming My AerSale Stock Price Target By More Than 30%

Core Viewpoint - AerSale's stock remains a buy despite disappointing progress on the AerAware rollout, with the company's future growth heavily reliant on this product [1][10][11] Financial Performance - In Q2, AerSale reported a year-on-year revenue increase, recovering from a decline in Q1, with total revenues reaching $77.1 million, up from$69.4 million [2][3][11] - Asset management solutions revenue increased by 12.8%, driven by higher flight equipment sales and lease revenues, while TechOps revenue grew by 9.4% [3][6] - Gross profit rose by 7.8%, but this was below the revenue growth rate, indicating margin contraction primarily due to lower demand for heavy MRO services [4][11] Segment Analysis - USM (used serviceable parts) sales increased by 19.5% year-on-year, while whole asset sales remained stable [6] - Engineering solutions sales surged from $211,000 to$1.7 million, attributed to increased AerSafe kit deliveries [6] - Leasing revenues decreased by 23% due to a shrinking lease portfolio, while product revenues grew by 15.1% and services revenues increased by 3.9% [6] AerAware Product Rollout - The AerAware product has faced significant delays, with no clear timeline for customer shipments despite receiving certification in December 2023 [8][9] - Management anticipates that deliveries could start in six months or longer, but there is no established rollout plan, which raises concerns about future revenue contributions [9][10] Market Outlook - The price target for AerSale stock has been significantly reduced from $18.70 to$6.70, reflecting a more cautious outlook on the company's performance without AerAware [10] - EBITDA estimates for 2024 have been cut by 15%, with expectations of cash burn this year, although there is potential for upside in subsequent years if MRO capacity expands and AerAware is successfully launched [10][11]