Lufthansa Shares Hit Multi-Year High as Turnaround Momentum Builds

Deutsche Lufthansa AG shares (ETR:LHA) climbed to their highest level in over two years this morning, trading at €9.42, up 2.28%, after touching €9.47 earlier in the day.

The German flag carrier's stock has now surged 41% over the past twelve months, with markets increasingly confident that the psychologically important €10 level, last breached in 2023, is within reach.

The rally reflects growing conviction in Lufthansa's comprehensive restructuring programme, which has attracted a wave of analyst upgrades in recent months.

Morgan Stanley delivered a rare double upgrade in early January, lifting its rating from Underweight to Overweight whilst simultaneously raising its price target from €5.40 to €9.30. The Wall Street bank cited the airline's turnaround initiatives, projecting annual EBITDA growth of 20% through 2027 driven by cost optimization, operational efficiency gains, and fleet modernization efforts.

That vote of confidence followed an equally bullish call from Kepler Cheuvreux in December, which upgraded Lufthansa to Buy with an €11.00 price target. The upgrade was underpinned by the carrier's €2.5 billion overhaul plan, centred on fleet renewal and service enhancements designed to improve both customer experience and operational margins.

JPMorgan also shifted its stance during the same period, moving from Underweight to Neutral and raising its target from €5.30 to €7.50, acknowledging improvements in the German economy and benefits flowing from cost restructuring.

The company has set ambitious medium-term targets, aiming to expand its EBIT margin from 4% in 2024 to between 8% and 10% by 2028-2030. Achieving those goals would represent a significant transformation for an airline that has faced persistent profitability challenges in recent years, particularly as it emerged from pandemic-era disruption.

Yet not all analysts share the enthusiasm. Barclays downgraded the stock from Equal Weight to Underweight in mid-January, despite marginally increasing its price target from €7.70 to €7.80. The bank expressed scepticism about the sustainability of positive sentiment across the European aviation sector, suggesting current valuations may have run ahead of fundamentals.

Operational headwinds also remain. In September, Lufthansa shares tumbled more than 6% amid potential strike action by German pilots, highlighting the fragility of margin recovery in a labour-intensive industry. The current economic climate in Europe, marked by subdued growth and persistent cost pressures, poses further risks to the airline's profitability roadmap.

With Lufthansa shares now trading at multi-year highs, markets are clearly pricing in successful execution of Lufthansa's turnaround strategy. Whether management can deliver the promised margin expansion whilst navigating labour relations, fuel volatility, and macroeconomic uncertainty will determine if this rally has further room to run.