Next Gen Upgrades AirTran (AAI), Continental (CAL), UAL (UAUA) to Buy
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Next Generation upgrades AirTran (NYSE: AAI), Continental Airlines (NYSE: CAL) and UAL Corp. (Nasdaq: UAUA) to Buy, citing the recent 30%+ sell-off. Notably, the firm had both AirTran and UAL at Neutral previously, and Continental at Sell.
The firm attributes the recent slide in stock prices to "investors locking in returns for year-end performance measurement (given rising fuel prices, headline news on swine flu, and a recognition that the earnings recovery will not be V-shaped after all)."
Further, Next Generation sees continued industry consolidation as "necessitated by general instability in profits." This supports the firm's recent thesis that "M&A is merely dormant, not dead."
The firm notes that it now has Buy's on most airline stocks in its coverage universe, with Alaska Air (NYSE: ALK) their favorite, followed by Delta Air (NYSE: DAL), US Airways (NYSE: LCC) and then UAL, Continental and AirTran.
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