Wheels Up private jet
Source: Wheels Up

What To Expect From Wheels up (UP) Stock After the ASPL Merger

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Jul. 13 2021, Published 7:29 a.m. ET

Private jet charter company Wheels Up (UP) is going public via a SPAC merger with Aspirational Consumer Lifestyle (ASPL). The transaction, which gives Wheels Up an implied pro forma equity value of $2.7 billion, is about to close. What's UP stock's forecast after the ASPL SPAC merger? Is the stock a good buy now?

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In Feb. 2021, Wheels Up and ASPL SPAC announced their merger. ASPL is led by LVMH executive and private equity investor Ravi Thakran. ASPL stock is now trading near its IPO price of $10 per share, but 16 percent below its 52-week high.

The ASPL–Wheels Up merger date

The merger was approved by ASPL shareholders on Jul. 12. Wheels Up is expected to close its business combination with ASPL on Jul. 13. Its Class A common stock and warrants will start trading on the NYSE under the ticker symbols “UP” and “UP WS”, respectively.

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wheels up up stock forecast after aspl merger
Source: Wheels Up

Wheels Up stock's forecast

Currently, ASPL stock is being tracked by just one Wall Street analyst, who has given the stock a "buy" recommendation and price target of $20. That target suggests a 102 percent upside from its current stock price.

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wheels up up stock forecast after aspl merger
Source: Wheels Up

Is Wheels Up stock undervalued?

ASPL assigned Wheels Up a pro forma EV (enterprise value) of $2.1 billion. Based on this EV and Wheel Up’s projected total revenue, its valuation multiples for 2021 and 2022 are 2.3x and 1.8x, respectively. Since Wheels Up is a growth stock, the company’s 2025 EV-to-sales multiple of 1.0x looks much more attractive.

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Considering that air taxi companies Joby Aviation (RTP) and Archer Aviation (ACIC) are trading at 2025 EV-to-sales multiples of 6.4x and 2.6x, respectively, Wheels Up looks undervalued.

Wheels Up stock is set to climb after the merger

Wheels Up’s stock outlook looks promising. Between 2020 and 2025, the company expects its active member count to grow 21 percent compounded annually. Wheels Up estimates its total addressable market in the U.S. will grow to $80 billion by 2025 from its current value of $51 billion.

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Wheels Up is a good long-term investment

Founded in 2013, Wheels Up is a leading private jet air company backed by Lance Armstrong and Serena Williams. The company provides three levels of membership, with initiation fees between $2,995 and $29,500. In 2020, Wheels Up flew over 150,000 passengers with nearly 1,500 owned and partner aircraft.

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Wheels Up expects to generate sales of $912 million in 2021 and forecasts its sales growing by 25 percent in 2022 and 23.5 percent in 2023. The company projects revenue of $2.1 billion in 2025. Wheels Up also foresees its adjusted EBITDA reaching $201 million by 2025, and its adjusted EBITDA margins expanding to 9.4 percent by 2025 from 0.7 percent in 2022.

As part of its merger with ASPL, Wheels Up will get gross proceeds of about $240 million in cash held by SPAC in trust and $550 million in PIPE (private investment in public equity) at $10 per share. PIPE investors include T. Rowe Price, Fidelity, Franklin Advisors, and Third Point. Wheels Up will use the money for growth.

What happens to ASPL SPAC stock after the merger?

After the transaction is closed, ASPL stock will immediately convert to Wheels Up stock and no longer exist in its SPAC avatar.

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