Shares of Mesa Air Group Inc. soared to pre-COVID highs, after BofA Securities analyst Andrew Didora swung to bullish from bearish, saying the regional air carrier is well positioned to capitalize on the return to travel.
The stock /zigman2/quotes/201991362/composite MESA -0.08% ran up 8.1% in midday trading, and has now jumped 54.0% over the past week. The stock has rocketed more than fivefold (up 438%) from its post-COVID closing low of $2.13 on April 3, to trade at the highest levels seen since December 2018, which was a year before the virus outbreak was believed to have started .
The stock’s rally Wednesday comes while the U.S. Global Jets exchange-traded fund /zigman2/quotes/207744796/composite JETS -0.53% edged up 0.3% while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.36% fell 0.6%.
Didora raised his rating on Mesa by two notches to buy from underperform, while boosting his stock price target more than sevenfold to $15 from $2.
He said Mesa is a “large beneficiary” of the U.S. government’s support of the airline industry, as it received more than $140 million in grant funds and a $195 million load to refinance higher debt costs.
And with long-term contracts at larger carriers United Airlines Holdings Inc. /zigman2/quotes/205037281/composite UAL -0.45% and American Airlines Group Inc. /zigman2/quotes/209207041/composite AAL -0.45% , “we believe Mesa is now well positioned to help its partners capitalize on a return to domestic travel, particularly as the network airlines should focus more on hub traffic,” Didora wrote in a note to clients.
Separately, Didora was also upbeat about Mesa’s recent partnership with United in placing a $1 billion order for all-electric vertical takeoff and landing aircraft (eVTOL) from Archer Aviation Inc.
Archer announced last week it was going public through a merger with special-purpose acquisition company Atlas Crest Investment Corp. /zigman2/quotes/223252119/composite ACIC -0.30% Mesa said at the time that it agreed to pay $5 million to buy 500,000 Atlas shares , and that it will receive a warrant exercisable to for 2.9 million Archer shares.
Atlas Crest’s stock surged 8.8% in midday trading.
Didora said that investment “gives Mesa equity exposure to a high-growth segment to balance out its more stable regional airline model.”
Mesa’s stock has more than doubled (up 127.8%) over the past three months, while the Jets ETF has advanced 15.1% and the S&P 500 has gained 8.3%.