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Hype Asset of the Day | January, 18th, 2022



United Airlines Holdings, Inc. (NYSE: UAL)

Major American airline United Airlines, Inc. is based in Chicago, Illinois, at the Willis Tower. All six inhabited continents and numerous U.S. cities are served by United Airlines's extensive domestic and international route network. With demand for flights booming after the pandemic, United Airlines has seen a surge in mentions by 28% over the last day, encouraging investors to wonder what makes the company so hyped. Currently, shares trade at $52.90.


Positive Hype

There are lots of reasons why United Airlines gained so much hype recently, here are some of them.


  • Shares of global airline stocks advanced more than 12% during the week ended Jan. 13, indicating that investors were unfazed by the service outage that temporarily grounded planes in the U.S. United Airlines was the best performer for the week, up 22%, followed by American Airlines (20%) and Frontier Airlines (17%).


  • United Airlines Holdings on Tuesday forecast at least a four-fold jump in full-year profit for this year and reported fourth-quarter earnings that topped Wall Street estimates on robust travel demand, sending its shares higher.


  • United Airlines was responsible for putting in one of the largest orders ever seen. In the “largest wide-body order by a U.S. carrier in commercial aviation history,” the company announced in December that it ordered 100 Boeing 787 Dreamliners with an option to purchase 100 more. United says it continues its “unprecedented effort to upgrade the interiors of its existing fleet.


  • The Chicago-based carrier sees an adjusted profit of $10 to $12 per share for 2023, up from $2.52 per share last year. That is well above analysts' estimates of $6.54 a share, according to a Refinitiv survey.


  • Q4 EPS came in at $2.46, better than the consensus estimate of $2.11. Revenue was $12.4 billion, beating the consensus estimate of $12.23B.


  • For Q1, the company expects EPS to be in the range of $0.50-$1.00, compared to the consensus of $0.25.


  • Total revenue is expected to grow approximately 50% year-over-year in Q1. For the full year, the company expects EPS to be in the range of $10 to $12, well above the consensus estimate of $6.54.

Negative Hype

Although there is an ample number of reasons that would make it a good idea to take a position in United Airlines right now, it is important to consider the drawback of any investment before making it. Here is one factor that might affect performance negatively.


  • Recently, shares of multiple American airlines, including United Airlines, fell between 14% and 30% in 2022 on mass cancellations and economic worries.

Conclusion

U.S. carriers are enjoying the strongest travel demand since the start of the COVID pandemic, boosted by the reopening of closed borders, a strong U.S. dollar and rising corporate travel. While recession fears have sparked concerns about consumer spending, airlines say travel demand remains strong and exceeds the pace of flight capacity growth, keeping ticket prices high. United Airlines, which has a Morningstar Rating of 3 stars and is trading at a 10% discount to Bernard’s $57 fair value estimate, is a good entry point to the airline industry’s takeoff.


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