By Sam Boughedda
Goldman Sachs analyst Noah Poponak initiated coverage on Wheels Up (NYSE:UP) with a Buy rating and a $5 per share price target in a note to clients Wednesday. Shares surged 24% in early trading following the bullish rating.
The analyst said Wheels Up, a provider of "on-demand" private aviation in the US, is a "leading company in an established and growing end-market, but one that is also fragmented and has substantial opportunity for an asset efficiency model."
"Conditions in the end-market are currently very strong, but there are also many unique long-term growth drivers. COVID-19 has catalyzed demand to fly private, and appears to be driving a structural shift to higher participation within the flier TAM," said Poponak. "The Wheels Up model optimizes the market with technology, enabling both greater demand and more efficient supply."
Currently, bottlenecks like supply chain and pilot availability have created a disconnect vs. meaningfully higher long-term earnings power, said the analyst.
"The stock reflects near-term challenges vs. long-term potential, creating an attractive entry point."
The new price target suggests 136% upside from Tuesday's closing price.