These top airline stocks to buy are expected to soar, all thanks to a busy holiday season. Over Thanksgiving break, an estimated 55 million people were expected to travel, according to AAA. Then, between, Christmas and New Year’s Day, AAA estimates about 120 million people will travel, with many by air. Thus, unless those millions of people plan on flapping their arms to take flight, that’s great news for airline stocks.
Notably, even with sky-high inflation, the American Society of Travel Advisors, about 75% of Americans plan to spend more on travel. In addition, “40% of respondents say that nothing is going to stop them from taking a vacation. Travelers are also eager to check things off their bucket lists in the very near future, with 25% planning to take a dream vacation by March 2023. The pandemic remains a big driver for travel intent, as well, with 70% of Americans looking at travel as a reward for what they have gone through over the past two years.”
That being the case, investors may want to consider these top airline stocks to buy.
US Global Jets
Defiance Hotel, Airline, and Cruise ETF
Delta Air Lines
JetBlue Airways (JBLU)
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After being grounded by the pandemic, JetBlue Airways (NASDAQ:JBLU) is an airline stock that’s poised to take off. In fact, I think if the stock can break above double top resistance around $8.54, it could potentially refill its gap around $10 shortly after.
Helping, CEO Robin Hayes said, “We continue to see a very healthy revenue environment with no signs of slowing demand for air travel,” as noted in the company’s third-quarter earnings call. In addition, the company posted a third-quarter profit, its first on an adjusted basis. For the quarter, JBLU posted a profit of $57 million, or 18 cents a share as compared to $130 million, or 40 cents a share last year. Sales were up 30% to $2.56 billion. JBLU is also trading at less than half of sales (0.30-times), and at less than book value (0.74-times).
US Global Jets ETF (JETS)
One of the best ways to trade any hot sector is with an exchange-traded fund (ETF). Not only do these tools allow you to diversify, but they also allow you to do so at a lower cost.
The US Global Jets ETF (NYSE:JETS), for example, currently trades at $18.72 and has an expense ratio of 0.60%. Some of its top holdings include United Airlines (NASDAQ:UAL), Delta Air Lines (NYSE:DAL), American Airlines (NASDAQ:AAL), Alaska Air Group (NYSE:ALK), JetBlue, Boeing (NYSE:BA), Booking Holdings (NASDAQ:BKNG), Expedia Group (NASDAQ:EXPE), Trip.com (NASDAQ:TCOM), and dozens more. If I wanted to buy 100 shares of JETS, it would cost about $1,872. With this ETF, I gain exposure to dozens of airline-related stocks. Meanwhile, if I were to buy 100 shares of just Booking Holdings and nothing else, it would cost me just under $200,000.
Defiance Hotel, Airline, and Cruise ETF (CRUZ)
Another interesting ETF to consider is the Defiance Hotel, Airline, and Cruise ETF (NYSE:CRUZ). At $17.31, with an expense ratio of 0.45%, the ETF offers exposure to companies that derive at least 50% of their revenue from airlines, hotels, resorts, or cruise lines.
Also, according to Defiance ETFs, “The pre-Covid travel and tourism industry constituted 10% of the world economy and contributed $8.9 trillion to world GDP. The pandemic has cost the sector an estimated $3.3 trillion; that’s a lot of suppressed demand and growth potential.”
Some of the ETFs top holdings include Delta Airlines, Southwest Airlines (NYSE:LUV), United Airlines, Ryanair Holdings (NASDAQ:RYAAY), Hilton Worldwide (NYSE:HLT), Marriott International (NASDAQ:MAR), and Carnival (NYSE:CCL) to name a few.
Southwest Airlines (LUV)
Southwest Airlines appears ready for takeoff, too. After bottoming out around $31, LUV stock is now up to $39.22. If it can break above its prior resistance around $41.64, I’d like to see it test $45 shortly after. Better, “While there’s noise regarding whether we are headed into a recession or not or whether we may even be in one now, we have not seen any noticeable impact on our booking and revenue trends,” CEO Bob Jordan said on a quarterly call.
The company’s earnings haven’t been too shabby either. Adjusted earnings per share came in at 50 cents, as compared to expectations for 42 cents. Revenue came in at $6.22 billion, as compared to estimates of $6.21 billion. Southwest Airlines is also a top airline stock pick for Morgan Stanley (NYSE:MS), thanks to its strong franchise and management team, as well as its balance sheet and recovering leisure and corporate travel.
American Airlines (AAL)
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American Airlines is another top option for investors looking for airlines stocks to buy. After finding double bottom support around $12, the stock is now up to $14.50. From here, if it can break above resistance around $15.50, it could see $18.
Earnings have been just as solid with this airline operator, as the company posted earnings per share of 69 cents in its third quarter on sales of $13.5 billion. Analysts were only looking for 54 cents on sales of $13.4 billion. American Airlines CEO Robert Isom also sees strong demand.
As noted in its earnings release, “The American Airlines team continues to deliver on our goals of running a reliable operation and returning to profitability. Demand remains strong, and it’s clear that customers in the U.S. and other parts of the world continue to value air travel and the ability to reconnect post-pandemic. American has the youngest, most fuel-efficient fleet among U.S. network carriers, and we are well-positioned for the future because of the incredible efforts of our team.”
United Airlines (UAL)
Source: EQRoy / Shutterstock.com
United Airlines is another carrier worth paying attention to. After finding double-bottom support around $32, the stock is now consolidating around $44.42. From here, I’d like to see UAL stock again challenge $52.50 near-term. In recent months, CEO Scott Kirby called third-quarter earnings, “the best operational quarter in our history,” as quoted by Barron’s.
For the quarter, the company posted adjusted earnings of $927 million, and total operating income of $12.9 billion, which was up just over 13% from the third quarter of 2019. Revenue per available seat per mile was 25.5% higher. Better, the company is optimistic about delivering strong financial results in the fourth quarter, and in 2023.
Analysts at Cowen have an outperform rating on the stock with a price target of $75. Citi (NYSE:C) analysts also have a buy rating on the stock with a price target of $56. “The carrier’s third-quarter results and fourth-quarter guide looked very strong, with unit revenue coming in above expectations and unit costs well-controlled, even if the carrier did seem to get a little help from a lower-than-expected third-quarter tax rate,” said Citi, as quoted by Barron’s.
Delta Air Lines (DAL)
Delta Air Lines rounds out this list of top airline stocks to buy. After finding support of around $28, the DAL stock is now up to $35.10. From here, I’d like to see it closer to $38.
While the company missed third-quarter estimates, it did provide an upbeat forecast for the fourth quarter. The stock was also upgraded to an outperform rating by analysts at Cowen, with a price target of $54. “The mix of air traffic passengers is shifting with higher yielding business and international passengers making up a great share,” they said, as quoted by Barron’s. “The former is directly correlated with the return to the office, while the latter receives a boost from loosening of pandemic restrictions.”
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.
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