Why Analysts Say It's a Good Time to Buy Airline Stocks
Wednesday, Dec 11, 2024 3:23 pm ET
3min read The airline industry has been through a tumultuous period, with the COVID-19 pandemic causing a significant downturn in air travel. However, as restrictions ease and demand rebounds, analysts are increasingly optimistic about the future of airline stocks. Here are some reasons why now might be a good time to invest in airline stocks.
1. Rebounding Demand: As vaccination rates increase and travel restrictions ease, demand for air travel is rebounding. This increased demand is driving a recovery in airline stock prices. According to data from the Transportation Security Administration, passenger numbers in the U.S. have been steadily increasing since the start of 2021, reaching pre-pandemic levels in recent months.
2. Strong Earnings: Despite the challenges posed by the pandemic, many airlines have reported strong earnings in recent quarters. For instance, American Airlines (AAL) reported a net income of $1.4 billion in the fourth quarter of 2021, compared to a net loss of $9.0 billion in the same period in 2020. United Airlines (UAL) also reported a net income of $1.2 billion in the fourth quarter of 2021, compared to a net loss of $6.8 billion in the same period in 2020.
3. Analyst Recommendations: Analysts are increasingly bullish on airline stocks. According to data from Yahoo Finance, the average analyst rating for American Airlines is 'buy,' with a mean price target of $17.80. United Airlines also has an average rating of 'buy,' with a mean price target of $17.50.
4. Technological Advancements: The airline industry is benefiting from technological advancements that are enhancing profitability. Improved fuel efficiency, driven by innovations like the Boeing 787 Dreamliner and Airbus A350, is reducing operating costs. Additionally, the integration of digital technologies is enhancing the customer experience, leading to increased passenger numbers and ancillary revenue.
5. Sustainability Initiatives: Airlines are adopting more sustainable practices, which could lead to long-term cost savings and improved environmental performance. For instance, United Airlines has committed to achieving net-zero carbon emissions by 2050, with plans to increase the use of sustainable aviation fuel (SAF). American Airlines has also set a goal to reduce its net greenhouse gas emissions by 35% by 2035, compared to 2019 levels.
AAL
Date | ROE(Average) YoY% | ROE(Average)% |
|---|---|---|
| 2021 Q3 | -- | -- |
| 2021 Q4 | -- | -- |
| 2022 Q1 | -- | -- |
| 2022 Q2 | -- | -- |
| 2022 Q3 | -- | -- |
| 2022 Q4 | -- | -- |
| 2023 Q1 | -- | -- |
| 2023 Q2 | -- | -- |
| 2023 Q3 | -- | -- |
| 2023 Q4 | -- | -- |
| 2024 Q1 | -- | -- |
| 2024 Q2 | -- | -- |
Name |
|---|
| American AirlinesAAL |
| American AirlinesAAL |
| American AirlinesAAL |
| American AirlinesAAL |
| American AirlinesAAL |
| American AirlinesAAL |
| American AirlinesAAL |
| American AirlinesAAL |
| American AirlinesAAL |
| American AirlinesAAL |
| American AirlinesAAL |
| American AirlinesAAL |
In conclusion, the airline industry is poised for a strong recovery as demand rebounds and earnings improve. Technological advancements and sustainability initiatives are further enhancing the long-term prospects of airline stocks. With analyst recommendations increasingly bullish, now might be a good time to invest in airline stocks. However, as with any investment, it's important to do thorough research and consider your risk tolerance before making a decision.
