11:33 AM EDT, 06/07/2024 (MT Newswires) -- AerCap ( AER ) is set to benefit from an aircraft supply shortage and a "solid" balance sheet, Morgan Stanley said Friday in a report initiating coverage on the world's largest aircraft lessor.

"We see risk-reward as balanced considering recent share price appreciation," while "downside risks include a higher interest rate environment and heightened geopolitical tensions," Morgan Stanley said.

Morgan Stanley rated AerCap ( AER ) equalweight with a $103 price target.

AerCap's ( AER ) business model proved "resilient" during the COVID-19 pandemic with only a minor decline in lease revenue and impairment charges, Morgan Stanley said. Despite a significant drop in global air traffic, AerCap ( AER ) managed to acquire GE Capital Aviation Services, demonstrating an ability to capitalize on opportunities in challenging times, the report said.

The company faces potential geopolitical risk due to its exposure to China. As of Dec. 31, almost 16% of its assets were leased to Chinese airlines, and AerCap ( AER ) "has acknowledged it is looking to decrease its exposure to China," Morgan Stanley said.

Shares of AerCap ( AER ) fell 0.8% in recent trading Friday.

Price: 90.53, Change: -0.74, Percent Change: -0.81