Delta, United, Alaska Air Are Top Analyst Picks In Airline Sector

Goldman Sachs has resumed coverage of nine airlines and gave a broad overview of the year ahead for the airline sector. Here's a look at the winners and losers in the industry.

The Details: Goldman Sachs analyst Catherine O'Brien said the firm expects supply constraints to continue for the airlines into 2025. She sees mixed stock performance ahead, with the airlines exposed to premium and corporate demand outperforming the sector. 

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ALK: The firm resumed coverage of Alaska Air Group, Inc. ALK with a Buy rating and a $70 price target on the stock. The analyst pointed to the airline's exposure to the West Coast corporate travel demand, which has begun to recover significantly. 

She also noted Alaska Air's improving interisland profitability and sees upside ahead related to synergies from the acquisition of Hawaiian Airlines. 

DAL: Goldman Sachs resumed coverage of Delta Air Lines, Inc. DAL as a Buy with an $83 price target, representing 28% upside to the stock's current levels. The firm said its Buy rating is underpinned by Delta's growth in loyalty revenue, which is driven partly by its long-term credit card agreement with American Express. 

O’Brien also highlighted the airline's exposure to passenger demand for premium services and its competitors exiting key cities where Delta continues to operate. 

UAL: O’Brien forecasted United Airlines Holdings, Inc. UAL to end 2024 with margins at nearly pre-pandemic levels and noted this as the highest rate of recovery among the firm's airline coverage. The Goldman Sachs analyst also highlighted United as among the best positioned to serve the increasing premium and corporate consumer demand. 

Goldman Sachs resumed coverage on United Airlines with a Buy rating and a $119 price target, representing 31% upside to the stock's current level. 

JBLU: The firm resumed coverage on shares of JetBlue Airways Corp. JBLU with a Sell rating and a $5.50 price target. O'Brien pointed to capacity restraints resulting from aircraft grounded for required maintenance and air traffic control staffing shortages in New York City, where the airline has a large hub. The analyst said that both issues are out of management's control and expects both to continue through the short term. 

LUV: The Goldman Sachs analyst resumed coverage on Southwest Airlines Co. LUV shares with a Sell rating and announced a $28 price target. O'Brien said Southwest's product and network are not aligned with the increasing demand for premium air services, putting it at a disadvantage in the current market. 

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