Wolfe Research analyst picks his favourite in the airline stocks

on Feb 15, 2022
  • Scott Group assumed coverage of the airline space with an "overweight" rating.
  • He upgraded Delta Air Lines to "outperform" with a price target of $50 a share.
  • DCLA's Sarat Sethi also picks Delta over United Airlines on CNBC Halftime Report.

The U.S. Global Jets ETF jumped more than 5.0% on Tuesday after Wolfe Research analyst Scott Group assumed coverage of the airline space with an “overweight” rating.  

Group sees an upside to $50 in Delta Air Lines

According to Group, the U.S. airlines received a massive blow due to the COVID-19 pandemic, but the sector is expected to outperform now that the global restrictions are starting to ease.

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The analyst agrees that higher fuel prices and a delay in business travel recovery continue to be a headwind but says opportunities have started to pop up in this space. Delta Air Lines Inc (NYSE: DAL) is his top pick among the legacy airlines that he rates at “outperform” with a price target of $50 a share.

DAL is our favourite stock among the legacy airlines with the most capacity discipline and thus best margins and EPS among the three. Our $50 target price is based on a blended average of a 9x target P/E and a 7x EV/EVITDAR multiple.

Among Group’s least favourite is United Airlines that he downgraded to “underperform” on Tuesday.

DCLA’s Sarat Sethi agrees with the outlook

On CNBC’s “Halftime Report”, DCLA’s Sarat Sethi also said he prefers Delta Air Lines over United Airlines. Shares of the latter, however, are also up 5.0% on Tuesday.

“I think UAL is popping just because of the reopening play. They have quite a bit of exposure internationally, and we’ve seen transatlantic opening up. But I still prefer Delta. I’m trimming my UAL and probably will be out of it pretty soon. But Delta is the one I’ll keep for a longer-term.”

In January, however, United Airlines reported market-beating results for its fiscal Q4 and said its quarterly loss noted a massive decline on a year-over-year basis.

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