We recently published a list of the 10 Best Airline Stocks to Buy For 2024. Since United Airlines Holdings Inc (NASDAQ:UAL) ranks 2nd in the list, it deserves a deeper look.
Despite rising inflation, consumers worldwide continue to spend on travel and experiences, defying all expectations and forecasts. Latest data from the International Air Transport Association (IATA) estimates that the airline industry is expected to generate $30.5 billion in net income in 2024, driven by higher ticket prices and consumers’ desire to travel. Last year, the industry’s net income came in at $27.4 billion. According to data from the World Travel & Tourism Council (WTTC) the economic impact of the travel industry this year is expected to soar to $11.1 trillion, beating its previous level of $10 trillion recorded in 2019. The Council expects the tourism industry to become a $16 trillion industry over the next decade, accounting for about 11.4% of the global GDP.
However, not all is rosy in the airline industry. The competition in the industry is increasing, while geopolitical headwinds and rising employee costs continue to batter small and large airline companies. IATA was quick to highlight that despite the industry growth, airlines’ profit per passenger is just $6.14. Travel demand in China also remains subdued amid real estate and economic crisis in the country. However, analysts believe sooner or later the country would rebound and the best airline and travel companies would benefit from the influx of Chinese tourists.
A KPMG report on the airline industry highlighted the resilience of the airline industry and its fast recovery to pre-pandemics levels:
“The latest air travel data from IATA shows that passenger travel for November 2023 globally has reached 99.1% of November 2019 levels. November 2023 international RPKs reached 94.5% of November 2019 levels, while domestic traffic was 6.7% above the November 2019 level. Although international global travel remains 5.5% below pre-pandemic levels, IATA director general Willie Walsh said that the gap is “rapidly closing”, adding that current “economic headwinds are not deterring people from taking to the skies”. IATA also noted that long-term airline profitability shows that while the industry is exposed to external shocks, it typically returns to profitability “relatively quickly”.”
In this backdrop, we decided to take a look at some of the best airline stocks to buy in 2024 according to hedge funds. For that we first listed down all holdings of an airline ETF, which provides investors exposure to the airline industry and tracks some of the biggest and most important airlines and aviation companies of the US and worldwide. From these stocks we chose 10 companies with the highest number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
United Airlines Holdings Inc (NASDAQ:UAL)
Number of Hedge Fund Investors: 46
United Airlines Holdings Inc (NASDAQ:UAL) is one of the best airline stocks to buy for 2024 according to hedge funds. The stock is up about 29% so far this year. Last month, Jefferies analyst Sheila Kahyaoglu gave a Buy rating to the stock, saying the stock presents a wealth creation opportunity. The analyst, who has a $65 price target on the stock, highlighted United Airlines Holdings Inc’s (NASDAQ:UAL) shareholder returns, free cash flow potential, and international margin upside. United Airlines Holdings Inc (NASDAQ:UAL) in April surprised the Wall Street with its strong Q1 results despite the Boeing 737 MAX 9-related impact earlier this year. United Airlines Holdings Inc’s (NASDAQ:UAL) Q2 expectations are also upbeat. It expects EPS in the range of $3.75 and $4.25, compared to the Wall Street estimates of $4. Based on Wall Street’s EPS estimate for United Airlines Holdings Inc (NASDAQ:UAL), United Airlines Holdings Inc’s (NASDAQ:UAL) EPS growth next year is expected to come in at around 17%. Over the next five years, United Airlines Holdings Inc (NASDAQ:UAL) growth is forecasted to remain at around 29% on an annual basis. In this backdrop, United Airlines’ P/E of 6.5 makes the stock look undervalued. The industry median P/E is 18.7.
A total of 46 hedge funds tracked by Insider Monkey reported owning stakes in United Airlines Holdings Inc (NASDAQ:UAL) as of the end of the first quarter.
ClearBridge Value Equity Strategy stated the following regarding United Airlines Holdings, Inc. (NASDAQ:UAL) in its fourth quarter 2023 investor letter:
“Our industrials stocks faced headwinds early in the quarter due to fears of a recession, which weighed on some of our more cyclical industrials such as United Airlines Holdings, Inc. (NASDAQ:UAL). Additionally, the Fed’s pivot and the prospect of rate cuts in 2024 helped fuel a rally in lower-quality industrials that we did not hold, further dampening the performance of our high-quality holdings.”
Overall, United Airlines Holdings Inc (NASDAQ:UAL) ranks 2nd on Insider Monkey’s list of 10 Best Airline Stocks to Buy For 2024. You can visit 10 Best Airline Stocks to Buy For 2024 to see other stocks in the list. While we acknowledge the potential of United Airlines Holdings Inc (NASDAQ:UAL), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than United Airlines Holdings Inc (NASDAQ:UAL) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
