Goldman Sachs Sees a Faster than Expected Airline Recovery Suggests Buying ALK and/or UAL, Both PTs Raised
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Goldman Sachs analyst Catherine O’Brien sees a faster than expected recovery in the economy and reiterated the Buy ratings on United Continental (NASDAQ: UAL) and Alaska Air Group (NYSE: ALK) while raising the price targets to $74.00 and $90.00 (from $54.00 and $64.00). The pace of the air travel demand recovery appears to be recovering faster than expected due to: 1) recent improvement in TSA demand; 2) easing of various government restrictions (travel and other); and 3) positive implications for demand trends from current levels. Goldman now expects 2022 and 2023 demand to be 5% lower and 9% higher than 2019,an improvement from the prior forecasts of 12% lower and 1% higher.
The analyst stated "We continue to see ALK shares as the best risk/reward in our coverage given its industry-leading balance sheet, unique cost tailwinds, and its significant exposure to domestic, leisure demand which we expect to be the fastest end market to recover; there is 32% upside to our 12-month $90 PT. As we exit 2021 and enter 2022, we expect international and corporate demand to begin to recover as well, and view UAL shares as the most attractive option to gain exposure to the recovery in those end markets given its relatively larger discount to historical valuation vs. its network carrier peers; there is 31% upside to our 12-month $74 PT."
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