Investors were beginning to believe that long positions in airline stocks were ready to take off after a winter storm forced cancellations coast to coast.
However, the airline industry is far from rosy, as evidenced by last week’s grounding of all US flights.
American Airlines’ Profit
The issue at hand wasn’t exceptional to airlines, but it does highlight the razor’s edge between profit and loss in the industry as a whole. But that’s not the only reason why you can make money off airline stocks in early 2023.
One major storyline to keep an eye on is earnings. The airline industry continues to struggle with a perfect storm of increasing headwinds and rising operating costs.
This indicates that earnings pressure is likely to persist. As the FAA error demonstrates, it wouldn’t take much to cause the airlines significant problems. Consequently, it may be time to seek out airlines with solid balance sheets.
David Seymour, EVP and Chief Operating Officer of American Airlines Group Inc. (NASDAQ:AAL), sold 74,614 shares at an average price of $16.03. The insider earned approximately $1,200,000 from the sale of these shares.
American Airlines Group recently reported a 40% year-over-year increase in operating revenue to $13.18 billion for the fourth quarter of fiscal year 2022.
American Airlines is the largest airline in terms of scheduled passenger revenue miles.
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Allegiant Travel Company (ALGT)
Allegiant Travel Company (NASDAQ:ALGT) has been the subject of three negative analyst reports. Susquehanna analysts lowered this company’s overall rating from Positive to Neutral, with a price target of $90. That’s about a 12% increase from the current price, but given the stock’s 58% decline over the past year, it may not be sufficient.
The consensus earnings forecast for Allegiant in 2023 is $6.16 per share. This would be significantly below 2019 levels.
Spirit Airlines (SAVE)
Spirit Airlines is the last of my three airline stocks to sell (NYSE:SAVE). Following shareholder approval of the airline’s merger with JetBlue Airways, SAVE stock exhibited a great deal of optimism (NASDAQ:JBLU). If the merger is approved by US regulators, the combined airline will have a 10.2% market share and be the fifth-largest airline by revenue.
This turmoil is reflected in the recent performance of the SAVE stock price. At the time of writing, the price of SAVE stock is $20.80. The consensus price target among analysts is $27.29 per share.
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