Airline stocks rebounded for most of this year as travel resumed, coronavirus vaccines found their way into patients’ arms and stimulus efforts cushioned the pandemic’s impact to the economy. But more recently, concerns have grown about the more contagious delta variant of the virus. So should you buy airline stocks now?
In the U.S. at least, travel demand is recovering from lows reached last April, after nations around the world restricted flights. U.S. airlines have received government assistance amounting to billions to help keep employees paid. When Delta Air Lines (DAL) leads the industry into second-quarter earnings season on Wednesday, analysts largely expect the carrier’s results to reflect more enthusiasm for travel.
Delta Air Lines last month said it expected to lose slightly less than initially expected for the second quarter. And it said it expected to record a pretax profit during the second half of this year, after losing money last year. American Airlines (AAL) has also reported “continued strength in net bookings and load factors.”
At a conference on May 25, Delta also said it expects travel trends for the month of June to be better than May, with a full return of domestic leisure travel demand by June. And it has said demand for premium seats, which bring in more profit, has outpaced that in the main cabin.
However, vaccinations have stalled in some parts of the U.S. More nations abroad have imposed travel and other health restrictions amid concerns about the spread of the the delta variant.
Most airline stocks are also still below pre-pandemic levels. Airline executives have predicted a bumpy recovery this year. But analysts expect most airlines to return to profitability next year.
Below, we take a look at the chart action for the major U.S. airlines.
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Delta Stock Chart
Delta stock is not in a base. Shares of the carrier are below their 50-day line.
Delta’s EPS Rating is 4 out of a best-possible 99. Its Composite Rating is 18.
The stock’s relative strength line has moved lower.
American Airlines Stock Chart
American Airlines stock is in a consolidation with a 26.19 entry.
Similar to Delta and the other airline stocks, it has a weak 32 Composite Rating and a 10 EPS Rating.
American is the only airline stock mentioned here that is expected to still lose money next year.
United Airlines Stock Chart
United Airlines stock is not in a base. The stock has lost support at its 50-day line.
The carrier’s ratings, as with other airline stocks, are also weak. United has a 21 Composite Rating. Its EPS Rating is 4.
Southwest Stock Chart
Southwest stock spent much of this year above pre-pandemic levels. But it has since fallen, and its price is roughly where it was before last year’s sell-off. Cowen said Southwest was the least leveraged airline heading into the pandemic.
Still, Southwest has 13 Composite Rating and a 4 EPS Rating. The stock is below its 50-day line.
JetBlue stock is not in a base, according to Marketsmith.
Shares have a Composite Rating of 13, with an EPS Rating of 4. The stock is below its 50-day line.
Are Airline Stocks Buys Right Now?
The recovery for airline stocks has been uneven. IBD ratings for airline stocks are weak.
Bottom line: Airline stocks are not buys right now. Investors eager to play the recovery could step in once those stocks enter buy zones. But IBD advises investors to seek out stocks with better ratings that are closer to their highs.
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