Why I Wouldn’t Invest in These 3 Stocks Right Now

For the first time since August, major U.S. indexes closed the month in red. The benchmark S&P 500 index lost 0.16% in January despite the new all-time high of $3,337.8.

The markets sold off heavily in the last day of January on coronavirus fears. Major U.S. airlines suspended or cancelled their operations from and to China, which makes the entire airline industry extremely vulnerable to declines in the coming weeks.

There are 3 airline stocks that should be avoided until the fears concerning coronavirus are eased, and they account for the following:

Delta Air Lines

Delta Air Lines is one of the major airline companies that decided to suspend flights from and to China. The last flight is scheduled to depart from China on Sunday, before Delta starts implementing new protocols introduced from the Trump administration.

Delta stock price declined nearly 5% in January to close the month at $55.74. Technically, the stock price has room to decline to at least $51.

American Airlines

American Airlines, the world's largest airline when measured by fleet size and revenue, has also suspended operations to and from mainland China since last Thursday. The airliner expects to have its flights grounded to at least the end of March.

Unlike Delta, whose stock trades near an all-time high, American stock price is threatening to print a 7-year low in the coming days and weeks. The company is also dealing with a lawsuit, filed by the union of its pilots, because the company didn’t stop flights to China soon enough.

The lawsuit makes the American Airlines stock even less attractive compared to Delta and other major airlines.

United Airlines

Shares of United Airlines suffered the biggest declines out of all major companies after losing more than 15% in January. As a result, United Airlines stock price is trading at the lowest levels seen since July 2018.

United suspended its flights to and from China as of February 01, due to a “significant decline in demand”.

The company is heavily exposed to Chinese markets as it has around 12 flights per day from the U.S. to mainland China and Hong Kong. This explains why United stock price has suffered more than shares of American or Delta.

Summary

Fears of further coronavirus outbreak have already provided a significant impact on airline stocks. As a result, shares of major U.S. airlines - United Airlines, Delta Air Lines and American Airlines - declined in the previous week.

Furthermore, analysts expect that flight cancellations have impact on full-year earnings and revenue too. For these reasons, it is advised to stay away from these three stocks until the situation surrounding coronavirus and China calms down.