NEW YORK (TheStreet) -- Shares of airline Virgin America (VA) are climbing after a number of research firms initiated coverage of the stock today with Buy or equivalent ratings. Virgin America launched an IPO last month.
WHAT'S NEW: Virgin America is an attractive investment, as it is a low-cost carrier with a "unique strategy," Deutsche Bank analyst Michael Linenberg wrote. Specifically, the company is catering to low end business customers and high end leisure customers who value "hip, high-tech" travel, the analyst stated. The airline offers lower prices than its competitors, partly because it only flies Airbus 320 airplanes and outsources many functions, Linenberg stated. He set a $44 price target and Buy rating on the shares. Imperial Capital's Bob McAdoo said that Virgin America caters to a profitable niche that appreciates and is willing to pay a premium for its flights. The firm believes there are numerous potentially profitable route opportunities Virgin could pursue in the future, which could include East Coast routes as well as flights to the Caribbean against JetBlue (JBLU) , given the airline’s head-to-head successes against legacy and traditional low cost airlines. Imperial began coverage of the stock with an Outperform rating and $52 price target. Meanwhile, Barclays analyst David Fintzen wrote that Virgin America has been able to generate "premium revenue" from its most developed routes. The company's stock can jump as much as 82% if fuel prices stay low, added the analyst. Virgin is facing competitive risks to its transcontinental routes, but any resulting headwinds should be more than offset by the boost the company will get from lower fuel prices contended Fintzen. The company's margins are poised to rise further, added the analyst, who initiated coverage of the shares with a $42 price target and Overweight rating. Bank of Amerca Merrill Lynch analyst Glenn Engel believes that Virgin's model is well-suited to consumers in San Francisco and Los Angeles, where its competition is "fragmented." Virgin is trading in-line with other airlines, but stands to benefit more from lower oil prices, the analyst stated. Engel started coverage of the stock with a $40 price target and Buy rating. Research firm Raymond James was less upbeat on Virgin America, starting coverage of the shares with a Market Perform rating.
PRICE ACTION: In early trading, Virgin America rallied 6.4% to $38.22. Virgin America priced 13.34M shares at $23 and began trading at $27 in its initial public offering on November 14.
Reporting by Larry Ramer.