On Tuesday, Citi updated its stance on shares of United Continental (NASDAQ:UAL), increasing the price target to $122 from the previous $98, while retaining a Buy rating on the airline's shares. The adjustment reflects a positive outlook on the company's revenue growth potential outside of the main cabin services.
The analyst from Citi highlighted that while Delta and United remain top picks among U.S. carriers, American Airlines (NASDAQ:AAL) has been given a higher rank due to its existing infrastructure, which is poised to enhance the quantity and quality of revenue beyond just the main cabin offerings.
Despite trailing Delta and United in financial leverage and margins, American Airlines is seen to have untapped potential that is not currently reflected in its year-to-date share price performance.
Furthermore, Citi has decided to remove United from its Focus List, although it continues to hold a Buy rating for the airline. The Focus List is typically reserved for stocks that Citi believes have significant potential to outperform.
The airline industry has been facing various challenges, but major carriers like United have been focusing on expanding their revenue streams and improving their financial metrics. The increase in the price target for United Continental indicates a confidence in the airline's strategy and its ability to execute on growth initiatives.
The price target revision comes as the airline industry continues to adapt to the changing travel landscape, with carriers looking to diversify their services and enhance passenger experience. United Continental's stock performance will be watched closely by investors as the company strives to meet its financial objectives and deliver value.
In other recent news, United Airlines Holdings (NASDAQ:UAL) reported a 2.5% year-over-year increase in revenue for the third quarter of 2024, reaching $14.8 billion. The company also initiated a $1.5 billion share repurchase program as part of its capital allocation strategy. Looking forward, United Airlines projects Q4 earnings per share between $2.50 and $3 and anticipates a double-digit pre-tax margin by 2026.
TD Cowen recently increased the price target for United Continental from $100.00 to $125.00, maintaining a Buy rating. The firm highlighted United's strategic investments in its network and fleet, as well as potential growth areas such as domestic market share, corporate travel, and international routes.
Goldman Sachs also upgraded United Continental shares to Buy, forecasting that the airline will approach pre-pandemic margin levels by the end of 2024. The firm's optimism is based on United's potential to grow amidst an improving revenue landscape and the airline's significant exposure to strong premium demand.
Seaport Global Securities raised their price target for United Continental from $80.00 to $97.00, maintaining a Buy rating. The firm's positive outlook is influenced by the potential for margin expansion in the airline industry, driven by disciplined growth strategies.
United Airlines' customer experience efforts are yielding results, as indicated by a 5 point year-over-year increase in its Net Promoter Score. The company's MileagePlus program and corporate travel segment also demonstrated strong performance, with revenues increasing by 11% and 13% respectively. These are some of the recent developments for United Airlines Holdings.
InvestingPro Insights
United Continental's recent performance aligns with Citi's optimistic outlook. According to InvestingPro data, UAL's stock has shown remarkable strength, with a 143.84% price return over the past year and a 29.73% return in the last month alone. The company is currently trading near its 52-week high, with its price at 98.81% of the peak.
InvestingPro Tips highlight UAL as a prominent player in the Passenger Airlines industry, which supports Citi's view of its potential for revenue growth. The company's profitability is also noteworthy, with a P/E ratio of 10.4 for the last twelve months as of Q3 2024, indicating an attractive valuation relative to earnings.
While Citi has removed UAL from its Focus List, InvestingPro Tips suggest that the company's high shareholder yield and strong recent returns could still make it an interesting option for investors. However, it's worth noting that UAL does not pay a dividend, which may be a consideration for income-focused investors.
For those interested in a deeper analysis, InvestingPro offers 11 additional tips for United Continental, providing a more comprehensive view of the company's financial health and market position.
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