What Happened?

Shares of aircraft leasing company FTAI Aviation (NASDAQ:FTAI) jumped 8.2% in the pre-market session after the company responded to Muddy Waters's short report, saying that it "...believes that the recent report by Muddy Waters is an attempt to profit at the expense of FTAI's shareholders by manipulating the company's stock price. We strongly disagree with the assertions made by this notorious short-seller, several of which are sourced to a single, anonymous individual who is described only as 'a former FTAI executive' and whose agenda is not explained."

Multiple Wall Street analysts also defended the company and its business. Citi called yesterday's stock move a "knee jerk" response, adding "Looking through Muddy Waters' report, some of the key arguments seem a little hard to understand, in our view." Morgan Stanley maintains "the view that FTAI provides value added MRO work for customers within its Aerospace Products business." The firm maintained its Overweight rating and $168 price target.

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What The Market Is Telling Us

FTAI Aviation’s shares are very volatile and have had 24 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The previous big move we wrote about was about 22 hours ago when the stock dropped 7.4% on the news that Muddy Waters, a research firm known for short reports and bets that stocks are overvalued, published a report on FTAI. 

Muddy Waters claims that FTAI Aviation has been recording one-time engine sales as Maintenance Repair & Overhaul (MRO) revenue in its Aerospace Products (AP) segment. This has led to a growth story in FTAI's AP revenue, which Muddy Waters believes is lower quality than investors give the company credit for. The research firm estimates that the majority of FTAI Aviation's adjusted EBITDA in the Aerospace Products segment comes from gains on sales, which is less recurring in nature.

FTAI Aviation is down 15% since the beginning of the year, and at $122.66 per share, it is trading 29.9% below its 52-week high of $174.96 from November 2024. Investors who bought $1,000 worth of FTAI Aviation’s shares 5 years ago would now be looking at an investment worth $6,429.

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