Market Overview

What's The Best Airline Stock? Barclays Has An Idea

Share:

In a report published Monday, Barclays analysts discussed Airline stocks, while highlighting that sentiments seemed to be surprisingly soft.

In the report Barclays noted, "It continues to surprise us that even on ‘normalized' earnings (i.e. $80/bbl oil and a one-time fuel benefit) larger US airline stocks have de-rated as much as 20% since last fall. For an industry set to produce 1Q margins that rival full year 2014 margins, market sentiment remains surprisingly tepid, particularly for SAVE and international exposure. "

Although there are headline concerns, the stocks seem to be already pricing in RASM and capacity woes, and maybe even the macro concerns. The analysts named Spirit Airlines, Inc (NASDAQ: SAVE) as their top pick, while adding that there could be "solid upside potential" for American Airlines Group Inc (NYSE: AAL), Delta Air Lines, Inc (NYSE: DAL), United Continental Holdings, Inc (NYSE: UAL) and Southwest Airlines Co (NYSE: LUV).

"We see 20% upside potential on average using fall 2014 forward multiples on 2016 estimates that are built on $80 oil. Oil and FX make forecasts more volatile, but we think the basic premise of limited fleet growth through limited capex is still driving improving earnings power for airlines," Barclays mentioned.

The analysts believe that certain airline stocks, especially AAL, DAL and SAVE, are reflecting 2-3 points of weaker RASM than the estimates.

"…we've seen SAVE's P/E premium to LUV come in 15-20% since mid 2014. For those looking to avoid international, we think SAVE is the best domestic option, followed by LUV," the analysts commented.

Barclays maintained an Overweight rating on SAVE ($110 PT), AAL ($68 PT), LUV ($52 PT) and UAL ($88 PT), while reiterating an Equal Weight rating on Alaska Air Group (NYSE: ALK) ($68 PT) and an Underweight rating on Allegiant Travel Co (NASDAQ: ALGT) ($167.00 PT).

Latest Ratings for SAVE

DateFirmActionFromTo
Jan 2021SusquehannaMaintainsNeutral
Dec 2020JP MorganDowngradesOverweightUnderweight
Dec 2020Deutsche bankDowngradesBuyHold

View More Analyst Ratings for SAVE
View the Latest Analyst Ratings

 

Related Articles (SAVE + AAL)

View Comments and Join the Discussion!

Posted-In: BarclaysAnalyst Color Reiteration Analyst Ratings

Latest Ratings

StockFirmActionPT
FANGMorgan StanleyMaintains71.0
EYEMorgan StanleyMaintains58.0
ETRMorgan StanleyMaintains109.0
ETNMorgan StanleyMaintains130.0
ESMorgan StanleyMaintains81.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com