Morgan Stanley issued a report Tuesday saying analysts’ consensus estimates for airline earnings were too low, and it upgraded United Airlines (UAL) - Get Report and Alaska Air Group (ALK) - Get Report.
United was upgraded to equal weight from underweight, and Alaska Air went to overweight from equal weight. Morgan Stanley initiated coverage of American Airlines (AAL) - Get Report at underweight. Delta Air Lines’ (DAL) - Get Report rating was left at overweight.
“We reiterate our attractive view on the U.S. airlines, despite the stocks [rising] 85% in the last five months,” wrote Morgan Stanley analyst Ravi Shanker.
“With a clear path to re-opening now in focus, we look out to 2022 [and beyond] and find consensus numbers are too low given our view of strong volume and cost tailwinds. We are about 30%+ above consensus in 2023,” Shanker said.
United recently traded at $59.26, barely changed; Alaska Air was at $73.70, up 3.67%; American at $24.06, down 0.72%; and Delta traded at $51.37, up 2.22%.
Shanker has target prices of $65 for United, $90 for Alaska Air, $20 for American and $72 for Delta.
“We see about 30% upside to our price targets and 45% upside to consensus 2023 estimates, on average, driven by quick rebound of air traffic, structural cost savings and a supportive jet fuel environment,” Shanker said.
Airline stocks rose Monday after the Centers for Disease Control issued new guidelines last week that gave the green light for fully vaccinated travelers to fly without quarantine.
United last week said it plans to hire about 300 pilots as demand for travel increases due to rising vaccination rates.