Bulletin
Investor Alert

Deep Dive

Philip van Doorn

May 27, 2020, 6:53 a.m. EDT

Airline stocks soared as much as 16% Tuesday — here are Wall Street’s favorites

Investors are banking on a recovery from the coronavirus crisis

By Philip van Doorn, MarketWatch


Bloomberg
Shares of Delta Air lines have fallen 56% this year. The majority of sell-side analysts now rate the stock ‘buy.’

(Updates story with closing prices for airline stocks.)

Investors are pouring money into airline stocks as the government eases restrictions on social activity and travel. Below is a list of U.S. airline stocks, with Tuesday’s gains and analysts’ favorites.

You may have been surprised that Warren Buffett decided to sell Berkshire Hathaway’s (NYS:BRK.B) holdings of airline stocks after they had already crashed in the wake of the coronavirus crisis and the obvious need to curtail air travel. During Berkshire’s annual meeting May 2, Buffett said he had been “wrong about that business,” and that the reaction to COVID-19 had changed the industry “in a major way.”

But even a troubled industry can see its stocks fall too far in the midst of economic chaos.

Michael Brush wrote Tuesday that Buffett made a mistake when he sold his airline shares, in part, because executives at the airlines are confident enough in the industry’s recovery prospects that they have been buying shares of their own companies. Most of the airline stocks have risen significantly since March 23, when the S&P 500 Index (S&P:SPX)  hit its low for the year, before a bounce-back rally for the benchmark index began. Then again, they are still far down for 2020.

UBS analyst Myles Walton upgraded Southwest Airlines (NYS:LUV) to a “buy” rating from a neutral rating, and raised his price target for the stock to $41 from $37 in light of “a clearer path for domestic travel recovery.” In a note to clients, Walton wrote that “unlike many other airlines, the balance sheet position of LUV is remarkably clean (near-net cash balance sheet), which provides protection from any step backward in demand under another wave of COVID-19.”

Nine airline stocks are included in the S&P 1500 Composite Index (which itself is made up of the S&P 500, the S&P 400 Mid Cap Index (PSE:MID)  and the S&P Small Cap 600 Index (S&P:SML) ).

Here they are, sorted by how much they went up on Tuesday:

Company Ticker Price change - May 26 Price change since March 23 Price change - Feb. 19 - March 23 Price change - 2020
United Airlines Holdings Inc. (NAS:UAL) 16.3% 12.5% -66.9% -66.5%
Allegiant Travel Co. (NAS:ALGT) 15.8% 41.2% -56.5% -41.8%
American Airlines Group Inc. (NAS:AAL) 14.8% 8.7% -63.8% -61.2%
JetBlue Airways Corp. (NAS:JBLU) 14.3% 54.0% -67.0% -43.6%
Hawaiian Holdings Inc. (NAS:HA) 13.2% 72.7% -67.2% -48.3%
Delta Air Lines Inc. (NYS:DAL) 13.0% 15.4% -62.0% -56.1%
Alaska Air Group Inc. (NYS:ALK) 12.9% 45.8% -63.1% -48.3%
Southwest Airlines Co. (NYS:LUV) 12.6% -3.6% -40.9% -39.8%
SkyWest Inc. (NAS:SKYW) 8.8% 47.2% -63.3% -52.5%
Source: FactSet

You can click on the tickers for more about each airline.

You will have to scroll the chart to see all the data.

Leaving the group in the same order, here is a summary of opinion among sell-side analysts polled by FactSet, including price targets and implied upside:

Company Ticker Share 'buy' ratings Share neutral ratings Share 'sell' ratings Closing price - May 24 Consensus price target implied 12-month upside potential
United Airlines Holdings Inc. (NAS:UAL) 53% 47% 0% $29.53 $36.87 25%
Allegiant Travel Co. (NAS:ALGT) 70% 20% 10% $101.29 $100.67 -1%
American Airlines Group Inc. (NAS:AAL) 21% 37% 42% $11.14 $10.87 -2%
JetBlue Airways Corp. (NAS:JBLU) 20% 67% 13% $10.57 $10.62 0%
Hawaiian Holdings Inc. (NAS:HA) 22% 56% 22% $15.15 $13.00 -14%
Delta Air Lines Inc. (NYS:DAL) 63% 37% 0% $25.65 $34.81 36%
Alaska Air Group Inc. (NYS:ALK) 57% 43% 0% $35.03 $39.69 13%
Southwest Airlines Co. (NYS:LUV) 53% 42% 5% $32.52 $39.00 20%
SkyWest Inc. (NAS:SKYW) 100% 0% 0% $30.67 $43.14 41%
Source: FactSet
Link to MarketWatch's Slice.