New Price Targets for 3 Airline Stocks Amid Tumble

Airline stocks had a turbulent ride through the first half of the year. By the end of the first half, shares of American Airlines AAL were down by 45%. United Airlines Holdings UAL lost 16% over that stretch, while Delta Air Lines DAL declined by 15%.

In April, Delta lowered its guidance. “I think we’re acting as if we’re going into a recession,” said Delta CEO Ed Bastian.

Blue Skies Ahead?

Despite this negativity, the skies were already beginning to clear by May. Near the end of that month, I wrote, “Despite the negative start to the year, the charts of these companies are hinting that airline stocks may soon take flight.”

On Thursday, shares of Delta soared by nearly 12%, after the Atlanta-based carrier reported solid earnings. In a post-report press conference, Bastian was singing a different tune.

“We remain focused on executing our strategic priorities … to deliver strong earnings and cash flow,” said Bastian. 

There was no talk of a recession.

Traders boarded the stock in a hurry, sending Delta soaring to a three-month high (circled). Delta closed cleanly above its 200-day moving average (red) for the first time in three months.

Delta gapped higher on heavy volume, marking the highest turnover for the stock this year (green arrow). The spike in volume hints at institutional participation, as well as possible short covering.

What is Delta’s next stop? Based on the above chart, the next major area of resistance is approximately $70 (black dotted line). That new target represents a 23% gain from Thursday’s closing price.

United Takes Flight

Shares of United Airlines Holdings also took flight, gaining 14.33% on Thursday. The stock gapped to a four-month high on a significant increase in volume. United is scheduled to report earnings on July 16. 

Based on this chart, United’s new target is $110. This figure represents a gain of 20% from Thursday's close, and is based on an area of resistance left over from January/February (black dotted line).

American Is Delayed

The chart of American Airlines reveals weakness when compared to its competitors above. While shares of American vaulted higher by 12.72% on Thursday, they failed to climb above the stock’s 200-day moving average (red). 

Due to its relative weakness, we’ll give American a conservative price target of $15. That figure represents a 15% gain from Thursday’s close. American Airlines is scheduled to report earnings on July 24.

The ascent of these airline stocks, along with Bastian’s comments, seems to indicate that the likelihood of a recession is fading. While the impact of tariffs is still to be determined, strength in this sector bodes well for the economy, as business and leisure travelers continue to remain active.

At the time of publication, Ponsi was long DAL and UAL.