United Airlines

United Airlines Forecasts Bigger Q3 Revenue Loss As COVID-19 Slowdown to Last Longer; Target Price $25 in Worst Case

United Airlines Holdings, one of the largest airlines in the world, forecasts that its passenger revenue in the third quarter of 2020 will plunge nearly 85%, more than a previous forecast of 83% decline as COVID-19 slowdown bites air travel demand and said it would continue to cancel flights until it sees signs of a recovery, sending its stock down over 2% on Wednesday.

The third-largest airline in the U.S. said they do not currently expect the recovery from COVID-19 to follow a linear path and the company’s actual flown capacity for the third quarter of 2020 is now expected to decrease about 70% year-over-year, as compared to the previous forecast of a decrease of 65%.

United Airlines’ shares fell over 2% to $36.32 on Wednesday; the stock is down about 60% so far this year.

United Airlines stock forecast

Thirteen equity analysts forecast the average price in 12 months at $39.43 with a high forecast of $61.00 and a low forecast of $25.00. The average price target represents a 7.97% increase from the last price of $36.52. From those 13 analysts, five rated “Buy”, seven rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a target price of $37 with a high of $79 under a bull-case scenario and $21 under the worst-case scenario. United Airlines’ stock price forecast was raised by JP Morgan to $44 from $43.

Other equity analysts also recently updated their stock outlook. In June, Seaport Global Securities initiates coverage with “Buy” rating and $56 target price, Citigroup raised price target to $47 from $38 and BofA Global Research upped their price objective to $45 from $30.

However, we think it is good to hold for now as 100-day Moving Average and 100-200-day MACD Oscillator signal a mild selling opportunity.

Analyst views

“We believe United Airlines (UAL) has the most challenged network of any airline in our coverage based on our path for a COVID recovery and a levered balance sheet, which could limit rebound opportunities,” said Ravi Shanker, equity analyst at Morgan Stanley.

“In addition, UAL’s new CEO Scott Kirby (former COO) is very well regarded by investors but investors may wait to see evidence that UAL is indeed focused on cost improvement rather than aggressive growth (at the cost of PRASM) before giving the stock credit,” Shanker added.

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