Jefferies' downgrade to ‘hold' weighs on Safran (SAF) shares, down 3.2%
Jefferies' downgrade of Safran, from "buy" to "hold" on 21 April, continues to weigh on the stock. The French group's shares fell by 3.2% on 24 April, trading at €270.00, after closing at €279.00 the previous day.
This downward revision, which was accompanied by a price target lowered from €350 to €310, is justified by Safran's exposure to its aftermarket activities. These are impacted by tensions in the Middle East, leading to a revision of the 2026 growth forecast from 15% to 5% due to air traffic disruptions and increased jet fuel costs for Gulf airlines.
The downward movement extends the 6.8% fall recorded on 21 April, the day Jefferies' note was published, and follows a 3.5% drop on 22 April. This trajectory contrasts with the optimism that had driven the stock to a 5.7% gain on 20 April, fuelled by optimism over 2025 production and annual results.
Why Revised Aftermarket Forecasts Weigh on Safran
Safran is a major player in aerospace and defence, designing and manufacturing aircraft engines, landing gear, and various high-tech equipment. Its customers are primarily airlines, aircraft manufacturers, and armed forces. A substantial portion of its revenue comes not only from the initial sale of this equipment, but also from its maintenance, repair, and the provision of spare parts throughout its lifecycle; these are known as aftermarket activities.
The downward movement observed in the share price is explained by Jefferies' downgrade of its recommendation from "buy" to "hold" on April 21. This downgrade is directly linked to Safran's exposure to its aftermarket activities, for which the projected growth for 2026 has been drastically revised from 15% to 5%. Geopolitical tensions in the Middle East, which are disrupting air traffic and increasing jet fuel costs for Gulf airlines, have led to this anticipation of a significant slowdown in demand for maintenance services.
It is this prospect of slowed growth for a key component of its revenue that has led to analyst caution. On April 24, Safran shares are trading at €270.00, a decrease of 3.2% from yesterday's closing price, which was €279.00.
Imagine a restaurant whose reputation largely depends on the quality of its home delivery service. If, suddenly, traffic conditions and fuel prices made this service much less profitable, and order forecasts fell from 15% to 5%, investors would naturally become more cautious about the company's future value, even if the main dining room continued to operate well.
Safran
Safran S.A. (SAF) operates globally within the aerospace and defence sectors, providing a comprehensive range of products and services. Its operations are structured across three key segments: Aerospace Propulsion, Aircraft Equipment, Defence and Aerosystems, and Aircraft Interiors. The company designs, develops, and manufactures propulsion systems for various aircraft, including commercial and military planes, helicopters, and drones, alongside offering maintenance and spare parts. It also produces critical aircraft components such as landing gear, engine systems, avionics, security equipment, and electrical power management systems. Furthermore, Safran is a significant supplier of aircraft interior solutions, encompassing passenger and crew seating, cabin equipment, galleys, and in-flight entertainment systems. Established in 1924, the company is headquartered in Paris, France.