Goldman Sachs Clears Airline Stocks For Takeoff

Airline stocks have been grounded for most of 2018, but one Wall Street analyst said on Monday it may finally be time top hop aboard airlines.

The Analyst

Goldman Sachs analyst Catherine O’Brien initiated coverage of the following airline stocks:

• Alaska Air Group, Inc. ALK, Buy rating, $81 target.
• American Airlines Group Inc AAL Buy rating, $44 target.
• Allegiant Travel Company ALGT Buy rating, $167 target.
• JetBlue Airways Corporation JBLU, Buy rating, $24 target.
• Hawaiian Holdings, Inc. HA, Sell rating, $28 target.
• Delta Air Lines, Inc. DAL, Neutral rating, $64 target.
• SkyWest, Inc. SKYW, Neutral rating, $62 target.
• Southwest Airlines Co LUV, Neutral rating, $61 target.
• Spirit Airlines Incorporated SAVE, Neutral rating, $61 target.
• United Continental Holdings Inc UAL, Neutral rating, $102 target.

The Thesis

Stronger revenue trends and strict cost controls should expand airline margins in 2019 for the first time in four years.

“Our positive view on revenue trends is underpinned by a benign capacity outlook, with a focus on growth from points of strength by the three largest carriers (American, Delta, and United), and bolstered by upward pricing pressure from the increased penetration of segmentation,” O'Brien wrote in the initiation note.

O’Brien named American Airlines and Alaska Air as her highest-conviction Buy ideas and Hawaiian Holdings as her highest conviction Sell idea. She said capacity incursions could lead to downward earnings revisions for Hawaiian in coming quarters.

Related Links:

JPMorgan Updates The Airline Sector: 3 Downgrades, 1 Upgrade

Deutsche Bank's Airline Update: Delta, American Upgraded To Buy