This Airline Stock Is Ready for Takeoff

 | Jul 09, 2014 | 3:52 PM EDT
  • Comment
  • Print Print
  • Print
Stock quotes in this article:




The airlines are the non-tech/biotech, momentum plays, and the shocking news that Delta (DAL) missed its numbers last week, causing analysts to guide estimates down, was in many ways the proximate cause of this most recent selloff.

Remember, I believe that there were just a couple of sellers in the last two days, and they were chased down by shorts -- shorts who are already being hurt today. I said the market was thin, but it might have been even thinner than I thought.

Some of that selling activity simply had to do with the extended run in the biotech/techs. But some of it was because Delta caused the analysts to surmise and assume that all airlines were hurting. Now, Delta did reveal a vulnerability that made you realize that estimates had finally stopped being underpromises, but Delta also caused you to realize that airlines aren't monolithic anymore.

This is a new development, not unlike the development of growing cash balances, buybacks and dividends for the companies in this sector. All airlines were either bad or good. But that the combination of U.S. Airways and American Airlines forming American Airlines Group (AAL) is yielding particular benefits to the new carrier, especially because it was the most egregiously blessed-by-Justice deal of all time.

Now the analysts are in a jam. They feel scarred by Delta and I imagine that someone is going to say tomorrow, "Phew, I get to downgrade without hurting the stocks."

To me, though, the issue is all about American itself. Even after today's recovery, it is still a buy, as numbers need to go higher. As long as they still need to go higher, so will the stock. So this nascent strength should be bought, not sold.

Columnist Conversations

View Chart »  View in New Window »
View Chart »  View in New Window »



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.