With the Sydney Airport Holdings Pty Ltd (ASX: SYD) share price down 3.1% this week, and flat in afternoon trading today, is now a good time to buy some shares?
Like many investors, I've been keeping a keen eye on Sydney Airport since the share price crashed 48% in February and March during the COVID-19 market rout.
Now, it's regained 26% since the 19 March low. But with domestic and international travel restrictions gutting its revenues, the share price rebound has significantly lagged the average within the S&P/ASX 200 Index (ASX: XJO).
Sydney Airport's share price remains down 31% year-to-date. The ASX 200, edging higher after losing ground this morning, is down 9%.
What does Sydney Airport do?
Sydney Airport Holdings owns a 100% interest in Sydney Airport, offering an international gateway connecting to more than 90 other airports around the world.
Headquartered in Sydney, the company provides aeronautical, retail, property, car rental, and parking and ground transport services through its 2 main business units: Aviation (Sydney Airport) and Leasing & Advertising Opportunities.
Sydney Airport shares began trading on the ASX in 2002.
Why Sydney Airport is looking more attractive at today's share price
If you merely look at the immediate picture, Sydney Airport's share price might seem overvalued, rather than beaten down.
From a short-term perspective, the company's September 2020 traffic performance report tells you all you need to know.
Sydney Airport reported 132,000 passengers in September. That's down a gut churning 96.4% on September 2019 numbers. International passenger numbers plunged the most, down 97.5%. But the domestic number, down 95.7%, wasn't much brighter.
Despite one-way travel from New Zealand to New South Wales, the Australian Capital Territory and the Northern Territory kicking off on 16 October, the company expects the downturn in passenger traffic to "persist until further government travel restrictions are eased".
And that will almost certainly be the case.
Moving forward
Domestic traffic through Sydney Airport will likely gradually increase over the coming months, presuming Australia can keep the coronavirus in sharp check. Two-way international travel to a few other nations with minimal to no infectious cases may follow sometime next year.
This tells me Sydney Airport's revenue likely won't recover to its January 2020 levels for some time yet.
And with most investors focused on shorter-term share price gains, Sydney Airport's share price likely won't rebound to its 17 January level of $8.81 per share (or higher) any time soon either.
But here's the thing. Unless the coronavirus (or some new version thereof) continues to plague the world without an effective vaccine or treatment, passengers will return to Sydney Airport.
As the head of Tourism Australia, Phillipa Harrison told the Australian Financial Review (AFR):
All the portents are good for us going forward – market research indicates people want to come here when they can travel again, and (travel) agents want to deepen their knowledge of selling Australia…
This isn't something that will transpire in a matter of weeks, or even months. But given time, Sydney Airport's current share price of $5.81 may well look like a bargain.
