UAL Stock Forecast: Why United Airlines Might Become a Huge Financial Success in 2023

ual stock forecast

UAL Stock Forecast: The fourth quarter of 2022 has been successful for airlines operating in the United States. Strong demand during the holiday travel season and increased ticket prices are expected to keep the industry’s upward trend heading into 2023.

Analysts working for Cowen believe that 2023 will bring more of the same, and they single out United Airlines (NASDAQ:UAL) as the best of the bunch. They took note of its outperformance this year as well as its exposure to the foreign travel industry, which is expected to continue its recovery next year.

UAL Stock Forecast for 2022

The United Airlines stock has increased by 0.3% in 2022, making it the only primary U.S. carrier in the black. As of the close of markets on Thursday, the NYSE Arca Global Airline Index, which monitors the performance of airlines, has decreased by 17%, while the S&P 500 has decreased by 14.5%.

Since the beginning of October, the share price has increased by 34%, indicating that investors are optimistic about the remainder of the year.

The analysts at Cowen, lead by Helane Becker, said in a note that “United has the highest exposure to the continued recovery in higher-margin international traffic among U.S. airlines.” They have an Outperform rating on the stock and have set a target price of $65, indicating a potential upside of 48% relative to the stock’s closing price on Thursday, which was $43.89.

Revenue for the top airlines in the United States, such as United Airlines, Delta Air Lines (DAL), American Airlines AAL –0.78% (AAL), and Southwest Airlines (LUV), skyrocketed during the third quarter as a result of an uptick in both domestic and foreign business travel. A continuation of that success is likely to occur in the fourth quarter due to the robust demand from the leisure sector, particularly during the holiday season.

Because there is a possibility of a recession in 2023, the demand picture is less clear. Of the three categories, foreign demand is possibly the one that will be most likely to remain at pace in 2023. The other two categories are leisure and business demand.

In order to take full advantage of this, United will be expanding its service this summer to include new routes to Malaga, Spain; Stockholm; and Dubai; in addition, the airline will be adding six additional flights to some of Europe’s most popular cities, including Paris, Rome, and London. Becker highlighted the fact that four out of United’s five newly introduced routes this year were profitable endeavors.

She stated that the United Next growth plan of the carrier ought to boost unit revenue as well as unit costs, while also minimizing the carrier’s exposure to revenue with a lower yield. The strategy, which was outlined in 2021, calls for an increase in the number of premium seats available by 75% by 2026 and an increase of the total number of seats available on North American flights by 30% each departure.

According to Becker, “a stronger floor” should be expected for rates due to industry capacity restrictions, limiting the downside risk associated with a weakening economy and placing a “higher floor” under yields. As a result of constrained capacity caused by a statewide scarcity of pilots and delays in aircraft delivery, airlines have been able to hike their fares. Pent-up demand has also contributed to this situation.

Even with the current state of the market, consumers continue to value vacation time, as stated by Becker.

The travel season surrounding Thanksgiving was a successful one for air travel, featuring the busiest day for air travel since 2019 occurring on the Sunday immediately after the holiday. According to the data provided by the Transportation Security Administration, more than 2.5 million individuals traveled through airport checkpoints in the United States on that one day.

The data also speak toward an extended holiday travel season, with the spike starting the Thursday before Thanksgiving and holding strong through the Monday after the holiday. This would indicate that the holiday travel season will be longer than in previous years. Both the airline industry and Wall Street had anticipated this, basing their forecasts on the rise of flexible remote employment.

What is the UAL stock forecast before the year ends? The industry may have a very successful earnings season for the fourth quarter if it looks like this through the Christmas vacation.

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About the author: Valerie Ablang is a freelance writer with a background in scientific research and an interest in stock market analysis. She previously worked as an article writer for various industrial niches. Aside from being a writer, she is also a professional chemist, wife, and mother to her son. She loves to spend her free time watching movies and learning creative design.