Please ensure Javascript is enabled for purposes of website accessibility

Why Air Transport Services Group Inc. Popped 26.6% Today

By Travis Hoium – Mar 9, 2016 at 12:44PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A new deal with Amazon has investors in this aircraft leasing company excited today.

Image source: Boeing.

What: Shares of Air Transport Services Group (ATSG 1.00%) jumped 26.6% Wednesday after online retailer Amazon.com (AMZN -1.08%) agreed to lease planes and was given the option to purchase a stake in the company.

So what: Amazon will be leasing 20 Boeing 767 freighters from Air Transport Services Group for a period of five years with an option for another two years. Amazon was also given warrants to acquire up to 19.9% of Air Transport Services Group's common shares for $9.73 per share. 

This is a big addition to Air Transport Services Group's externally leased fleet, which stood at 30 aircraft at the end of the year.

Now what: While this is a big win for Air Transport Services Group, Amazon may have taken most of the potential upside for investors with its warrants. We also don't know anything about rates Amazon will pay or how much profit this could add to the company's income statement. While investors should look at this signing as a positive, I think the pop today is overdone and investors need to wait and see how Amazon impacts Air Transport Services Group's financials before piling into the stock.

Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Amazon.com Stock Quote
Amazon.com
AMZN
$95.50 (-1.08%) $-1.04
Air Transport Services Group Stock Quote
Air Transport Services Group
ATSG
$28.32 (1.00%) $0.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.