United Airlines is a must-own airline stock for 2024

Key Points

• Shares have been quiet so far this year, but that’s about to change. 
• After a strong earnings report, several analysts are looking for a 50% upside. 
• There’s also the catch-up play potential, as United has lagged behind the wider airline sector.

Having traded pretty much sideways for the past three months, shares of United Airlines Holdings, Inc. NASDAQ: UAL are finally starting to look like they're ready to take off again. With equities in general enjoying some of the best gains in recent years, airline stocks have lagged noticeably. It’s an interesting divergence, especially when you consider how closely the likes of United tracked the broader market performance all last year. 

But by struggling simply to match the benchmark index's performance, the S&P 500 so far this year has opened up an interesting entry opportunity. United shares have been setting higher lows since the middle of January and are on the cusp of a higher high. These are key patterns investors want to see in any uptrend, and if United can confirm the setup in the next couple of sessions, then watch out above. 

The current move started with the company topping analyst expectations for their Q4 earnings last month. Their forward guidance also came in hot, with management now expecting full-year adjusted EPS to land between $9 and $11 versus the previous $9.48 consensus. Perhaps even more than the headline numbers from the previous quarter, Wall Street loves to see a company’s own guidance top analyst expectations, as it tends to always result in a repricing of shares to the upside. 

Bullish upgrades

It also forces analysts to revisit their own estimates and forecasts for the stock and often means fresh upgrades. Such was the case with United, as the team over at Evercore ISI upped their rating on the stock last week. Having previously had it rated at a neutral In-Line rating, they upgraded it to a full Outperform rating on the back of a brighter-than-expected outlook for the year ahead. 

Analyst Duane Pfennigwerth and his team pointed to what they called “investor-friendly moves,” such as a likely shift in capital allocation, which they consider to be one of the more bullish tailwinds a stock like United can have. They’re also impressed by the high level of management execution and comparison valuations against their peers. 

Their fresh price target of $65 points to a further upside of at least 50% from current levels, which is far from the only bullish call out there. The TD Cowen team reiterated their Buy rating on United shares last month and also gave them a $65 price target, something the Raymond James team did as well at the end of December. 

So, with the company performing better than expected last quarter and now expecting to do even better this quarter, there’s a lot to like about United. Throw in the fact that several heavyweight analysts are targeting the region of least 50%, and you can be confident we’re onto a winner here. 

Getting involved

Technically, the stock needs to close above last month’s high of $45 to set a higher high, which would confirm a new uptrend is emerging and put the path to $65 into play. If United shares were able to pull that off in the coming weeks and months, they’d be trading at post-pandemic highs and good value to keep trending toward their all-time high of around $100. 

As with all airlines, serious risks exist beyond their control, such as those related to structural problems in aircraft like we saw last month. There’s also the fact that United has lagged behind its airline peers, which, on the one hand, isn’t good luck but, on the other, lends itself to the sense that there’s a rare pre-rally entry opportunity opening up here. 

Because, on the whole, United has enough tailwinds in place right now to get the stock trending up again, and short of any industry-wide pullback, the upside potential here makes this one of the must-own airline stocks for the year ahead.