United Airlines stock prediction amid optimistic European outlook

By:
on Oct 20, 2021
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  • United Airlines shares on Wednesday edged slightly lower after announcing FQ3 results.
  • The company reported its most recent quarterly results before markets opened beating expectations.
  • The company wants to target the EU projected record flying levels by boosting international capacity by 10%.

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On Wednesday, United Airlines Holdings Inc. (NASDAQ:UAL) shares edged slightly lower after reporting its most recent quarterly results. The company announced its fiscal third-quarter revenue and earnings before markets opened, beating the consensus Street expectations.

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The company posted fiscal Q3 non-GAAP earnings per share of -$1.02, beating the average for Street expectations of -$1.68. In addition, its GAAP EPS of $1.44 outperformed the average estimate of -$1.37, while revenue for the quarter skyrocketed by over 211% Y/Y to $7.75 billion, $110 million ahead of the average for analyst forecasts.

However, despite the summer driven growth, UAL’s Q3 capacity remained below pre-covid levels at 28%, pushing total operating revenue nearly 32% off the 2019 levels.

Is UAL undervalued?

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From an investment perspective, United Airlines shares trade at an exciting forward P/E ratio of 15.94, making the stock a compelling option for value investors.

However, analysts forecast its earnings per share to plummet by more than 318% this year before recovering by 133.3% next year. Therefore, although the stock looks potentially undervalued, its projected earnings decline could be playing a part in the valuation.

As a result, it may be best to monitor the performance before betting on the recovery.

Source – TradingView

Technically, United Airlines shares appear to have recently pulled back to complete a downward breakout from an ascending channel formation. As a result, the stock has dropped below the 100-day moving average creating an opportunity for a rebound.

However, with shares far from reaching oversold conditions, the current decline could continue. Therefore, investors could target extended declines at about $42.68, or lower at $39.44, while $48.96 and $52.17 are the support levels.

Not safe to buy yet?

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In summary, United Airlines shares seem to have recently plummeted to break out of an ascending channel formation. However, the stock is yet to reach the oversold conditions of the 14-day RSI.

Therefore, given the company’s expected earnings decline this year, it may be best to wait before betting on next year’s rebound.

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