United Airlines Holdings Inc (NASDAQ:UAL) having 79 Boeing 737 Max 9 planes grounded by the FAA hasn’t bothered Bank of America analysts.
The firm hit United with a double upgrade to Buy from Underperform and raised its price target to $56 from $40. Shares of the airline rose 2.2% Tuesday afternoon to $43.38.
This is the first time BofA has rated United a Buy since the pandemic began.
“Our last Buy rating on UAL was March 2020 as relatively high valuation, robust capex and leverage concerns left us more cautious,” the analysts wrote. “Today, we see a valuation disconnect vs UAL's execution and its more favorable leverage outlook than expected.”
Importantly, United has been the “first-mover” in the transatlantic, with larger capacity growth from the second to the third quarter of 2023 than its rivals.
“While we expect international trends to normalize this year, we forecast UAL will continue to drive outsized revenue growth vs its peers,” analysts added.
“The risk to UAL is that transatlantic over-earned in 2023. However, in our new 2024 EPS forecast of $8.42 ($7.61 prior), we assume transatlantic revenues are -2% (vs total revenues +3.7%) as the market calibrates additional capacity.”