MKM Partners Initiates Coverage On Airline Sector, Names Delta Top Pick

Airline stocks are flying high so far in 2021 as investors anticipate a booming summer travel season and a return to business travel in coming quarters.

On Thursday, MKM Partners initiated coverage of the airline group and said some stocks have more near-term upside than others.

The Analyst:
MKM analyst Conor Cunningham initiated coverage of the following airline stocks:

• Delta Air Lines, Inc. (NYSE: DAL), Buy rating, $59 price target.
• Southwest Airlines Co (NYSE: LUV), Buy rating, $74 price target.
• Spirit Airlines Incorporated (NYSE: SAVE), Buy rating, $44 price target.
• Alaska Air Group, Inc. (NYSE: ALK), Buy rating, $81 price target.
• American Airlines Group Inc (NYSE: AAL), Buy rating, $29 price target.
• Allegiant Travel Company (NASDAQ: ALGT), Neutral rating, $230 price target.
• JetBlue Airways Corporation (NASDAQ: JBLU), Neutral rating, $21 price target.
• United Airlines Holdings Inc (NYSE: UAL), Neutral rating, $65 price target.
• Hawaiian Holdings, Inc. (NYSE: HA), Neutral rating, $27 price target.

Related Link: Airline Stocks Up Following Strong Memorial Day Weekend Bookings

The Thesis: In the initiation note, Cunningham said rising vaccination rates, falling COVID-19 cases, easing travel restrictions and pent-up travel demand have created a very bullish scenario for airlines. MKM is anticipating a strong summer travel season and a rebound in corporate travel starting in the second half of the year.

Looking further ahead, Cunningham said he is also anticipating another travel boom during the 2021 winter holiday season.

“Our view is the rebound in leisure is supportive of current valuations, but additional upside in the shares will come with corporate and international travel surprising to the upside,” he said.

With the airline group already pricing in a significant recovery, Cunningham said investors should focus on stocks that have the potential to surprise to the upside when corporate travel starts to rebound. He named Delta as his top overall stock pick among the nine airline stocks.

Benzinga’s Take: All of the airline stocks have bounced back tremendously from their March 2020 lows as investors anticipate a sharp recovery in 2021 and beyond.

The biggest question marks at this point are just how long will it take for airlines to recover the majority of their 2019 business and how much of that is already priced into the stocks.

(Photo: Delta Air Lines)