Market Overview

JPMorgan Projects 50%-Plus Airline Revenue Decline In 2021

Share:
JPMorgan Projects 50%-Plus Airline Revenue Decline In 2021

JPMorgan is cautious on the airline industry and reducing its forecasts on the basis of conservative demand. 

The Airline Analyst: Jamie Baker upgraded JetBlue Airways (NASDAQ: JBLU) from Underweight to Overweight with a $17 price target. 

Baker upgrades United Airlines (NASDAQ: UAL) from Neutral to Overweight and raised the price target from $44 to $52. 

Baker downgraded Southwest Airlines (NYSE: LUV) from Neutral to Underweight and added a $41 price target. 

Baker upgraded Spirit Airlines (NYSE: SAVE) from Underweight to Neutral and raised the price target from $14 to $19. 

Baker remains Overweight on Alaska Air Group (NYSE: ALK) and Delta Air Lines (NYSE: DAL). Baker is Underweight on American Airlines Group (NASDAQ: AAL).

The Airline Takeaways: The airline industry's recovery year will be 2022, Baker said in a Wednesday note. 

“We believe certain managements may walk back their cash burn targets given current demand trends, a slower pace of advanced bookings, and higher expenses associated with negotiated alternatives to furloughs,” the analyst said. 

The big three airlines will likely see revenue decline more than 50% in 2021 vs. 2019, compared to an earlier forecast of 25% and a analyst consenus estimate of a 35% decline, he said.

Baker is modeling 2021 as a challenging year and said demand is unlikely to rise above 50% until the second half of 2021 at the earliest. 

The risk-reward is favorable for JetBlue at its current valuation, the analyst said.

“We continue to believe that the company’s cost control will continue to be in focus following [the] impact of COVID-19.”

Despite downgrading Southwest Airlines, Baker said he remains “part of the fundamental bull chorus” for the airline. 

“Southwest remains the airline we can most easily envision emerging from the crisis better positioned than it went in,” the analyst said. 

Southwest is likely to see an earlier return to dividends and share repurchases than other airlines due to passing on government loans, he said. 

“We continue to view Delta as the industry leader,” Baker said.

Delta has the highest margins among legacy airlines, the analyst said. 

The company’s innovation, management team and balance sheet are positives, he said. 

What’s Next: Baker said on CNBC Wednesday that the price targets and ratings assume the airline industry will not receive any relief.

Airline Price Action: Most airline stocks were trading higher Wednesday on the possibility of relief funds.

JetBlue shares were up 5.39% at $12.13. Southwest Airlines shares

were trading 2.16% higher to $38.39. 

Delta Air Lines shares were trading 2.62% higher to $31.86. 

The US Global Jets ETF (NYSE: JETS) was trading up 2.04% to $17.52. 

 

Related Articles (ALK + AAL)

View Comments and Join the Discussion!

Posted-In: Jamie BakerAnalyst Color Upgrades Downgrades Price Target Travel Analyst Ratings General Best of Benzinga

Latest Ratings

StockFirmActionPT
INTCJP MorganMaintains70.0
STMCanaccord GenuityMaintains47.0
ELDeutsche BankMaintains248.0
UAADeutsche BankMaintains13.0
INTCDeutsche BankMaintains55.0
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