United Airlines Stock: Should You Invest in It?

United Airlines (UAL) is one of the best airline stocks and a major player in the global aviation industry, boasting a rich history and a significant presence in domestic and international travel. After a rough patch during the COVID-19 pandemic, UAL stock has seen a modest recovery, but is it poised for a sustained flight path or headed for turbulence?

However, whether UAL is a good investment for potential investors hinges on many factors.

About United Airlines Stock Price

United Airlines (UAL) closed the recent trading session at $43.04, a 1.58% rise from the previous day. This outperformed the broader market, with the S&P 500 gaining 0.74%. However, UAL has seen a slight decline (1.55%) over the past month, lagging behind the Transportation sector’s 6.39% growth.

Investor focus is on UAL’s upcoming earnings report on April 16th. Analysts project a loss of -$0.52 per share, but a 17.46% year-over-year growth in earnings is expected. Revenue is also forecast to climb 8.9% to $12.45 billion.

Despite the projected growth, analyst estimates for UAL have been revised downwards slightly in the past 30 days. This could indicate some short-term concerns. However, UAL currently holds a Zacks Rank #3 (Hold), suggesting a neutral outlook.

Valuation metrics paint a potentially attractive picture. UAL’s Forward P/E ratio of 4.42 sits below the industry average (9.25), suggesting it might be undervalued. Similarly, the PEG ratio of 0.59 is lower than the industry average (0.72), further hinting at potential value.

Overall, UAL has shown some positive momentum recently. However, upcoming earnings and analyst revisions will be crucial factors to watch. The Transportation – Airline industry holds a strong Zacks Industry Rank (88), indicating potential for growth within the sector.

Analyst Opinions on United Airlines Stock Forecast

• Price Target

Analysts are cautiously bullish, with an average price target of $58.27, which would mean a potential upside of 39.40% from the current price of $41.80. This shows that there is potential for improvement. With a high of $75.00 and a low of $40.00, the expected range is broad, indicating some uncertainty.

• Earnings

The earnings projection for the upcoming quarter is -$0.54, with a range signifying possible losses. Given the favorable EPS of $2.00 from the prior quarter, this could cause concern. It is also crucial to remember that UAL has a track record of surpassing industry performance (64.32%) and outperforming EPS projections 100% of the time in the previous year.

• Sales

Analysts expect sales for the upcoming quarter to total $12.43 billion, with some room for fluctuation. It’s interesting to note that, for the past year, UAL has consistently exceeded sales projections, surpassing the industry average of 61.11%.

• Overall

Analysts appear to have a generally optimistic view of the price of UAL’s stock, even though the prediction of negative profits prompts some caution. A certain amount of comfort is provided by the solid history of exceeding forecasts in sales and earnings. However, the range of price projections and possible losses in the upcoming quarter emphasizes the necessity of doing more research before investing.

Factors Influencing Predictions

Although the data indicates UAL’s possible benefits, any forecast on the company’s stock price entails intricate interactions between several variables. The following summarizes the potential impact of these factors on UAL’s future:

• Travel Demand

First, consider the need for travel, propelling airlines into the sky. An expanding middle class & growing disposable income usually lead to an increase in the number of people taking to the skies.

The increase in travel directly affects UAL’s financial results. In contrast, when the economy is struggling, many in the sector decide not to travel, which sends shivers down their spines.

• Fuel Prices

Another major factor is fuel cost, the jet fuel that propels these predictions. Since fuel prices are a substantial expense for airlines, even slight fluctuations can have a significant impact. A rise in oil prices can significantly erode UAL’s profits, while a dip boosts their financial health.

• Economic Conditions

Apart from specific economic concerns, the state of the economy as a whole is quite important. Strong economic conditions, coupled with growing incomes, stimulate travel and wanderlust. On the other hand, financial instability may result in reduced spending and canceled travel, which could harm UAL’s chances.

• Competition

The airline sector is fiercely competitive in terms of market share. UAL is up against some fierce competition from other big players. Offering affordable rates, appealing routes, and a superior passenger experience that sets them apart from the competition are essential to their success.

Why Invest in UAL? Potential Upsides to Consider

After being severely damaged by the epidemic, the airline sector is beginning to recover. United Airlines (UAL) has many potential advantages for investors and is a strong contender to profit from this upturn.

• Travel Demand Recovery

A return to normalcy and pent-up wanderlust are driving a spike in travel. Airlines immediately benefit from this, and UAL is well-positioned to take advantage of this expansion. Because of UAL’s vast network, they are well-positioned to benefit from easing travel restrictions, especially for foreign travel.

• Improved Financial Health

After the pandemic, UAL has become a meaner, leaner machine. A return to profitability and cost-cutting initiatives are encouraging signs for the future. Revenue increased in Q42023, even though their margin shrank. UAL should continue generating financial gains as long as travel demand remains.

• Fleet Modernization

UAL is making significant investments to update its fleet, which has various benefits. Modern aircraft use less fuel, which lowers operational expenses. A modern fleet also improves the traveler experience, which may result in more devoted patrons and higher ticket costs.

• Potential for Dividends

Future dividends are becoming more likely as UAL’s financial standing improves. A company that regularly pays dividends shows confidence in its long-term profitability, which can appeal to investors wanting income alongside possible capital appreciation, even though it is not a certainty.

Beyond Analyst Ratings: Conducting Your Research

• Review UAL’s financial statements

A company’s financial records are a goldmine of information on its health. Examine UAL’s cash flow, debt, revenue, and profitability. Do they make money? Are they able to pay their debts? Robust financials are a sign of future expansion.

• Stay informed about industry trends

Avoid getting sucked by turbulence. Recognize the environment of the airline sector. What impact will fuel costs have on UAL? Are activities affected by any new regulations? Is demand for travel increasing? You may foresee future possibilities and difficulties by keeping up with industry trends.

• Consider your own investment goals & risk tolerance

Everything revolves around you! Do you want to grow over the long term or just now? To what extent are you willing to take risks? If you are a long-term investor looking for industry growth, UAL might be a suitable fit, but if you are more concerned with short-term stability, this may not be the ideal option.

Conclusion

Deciding on UAL hinges on your risk tolerance and investment goals. While analyst outlooks are cautiously optimistic, upcoming earnings and broader economic factors are crucial. UAL offers potential benefits like travel rebound and fleet upgrades, but competition and fuel costs can be headwinds. 

Conduct your research by reviewing financials, understanding industry trends, and aligning them with your investment goals to make an informed decision.