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.

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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

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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.

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DCLA’s Sarat Sethi agrees with the outlook

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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.

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“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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