The airline industry has been decimated both in terms of ticket sales and stock prices.  The majority of the industry’s stocks are down 50% – 75% or even more since the start of the coronavirus pandemic.  However, there is reason for hope.  More people are willing to fly now that coronavirus-related deaths are on the downswing and quarantines are being lifted.  This means the sharp industry-wide selloff might also be coming to an end in the near future.  When the time is right, seize the opportunity to invest in these three airlines: Delta, Southwest and United Airlines Holdings.

Delta Air Lines (DAL) 

There is a diamond in every rough.  Though most airline stocks have quickly become risky investments as daily sales losses pile up, a few have the potential to bounce back sooner than their peers.  DAL is one of these diamonds in the rough.

There’s a lot to like about DAL, especially as a long-term investment play. Take the quadrupling of the dividend since 2014, for instance.  Prior to the COVID-10 slowdown, DAL had the honor of being the world’s largest passenger airline.  There is no reason to think this status will change in any substantive way when the economy reopens.

DAL is currently trading at $22 a share yet TipRanks’ average analyst price target is $38.58.  As detailed in this Motely Fool article, DAL has outpaced its airline peers in free cash flow and net income, making it the darling of a beaten-down industry sure to spring back to life when society returns to normal.  If you are OK dealing with some turbulence, now is a great time to buy DAL.

Southwest Airlines Company (LUV)

When it comes to stock analysis, a company’s “buy and hold” value combined with its ranking amongst its industry peers and industry rank as a whole are of the utmost importance.  However, when you take a look at the POWR Ratings for airline stocks, most grade quite poorly.

LUV was a solid company prior to the coronavirus pandemic yet it has quickly fallen to a 52-week low.  LUV has a D Peer Grade in the POWR Ratings, meaning it stacks up better than some others against its fellow downtrodden airline peers. Furthermore, LUV is ranked in the top half of the POWR Ratings’ analysis of the airline industry as a whole, coming in at #10 of 21 stocks.

LUV’s focus on domestic travel routes has appeared to pay off and may prove to be a solid part of an expected rebound. International travel is sure to lag behind domestic trips, a trend that will give LUV an edge over the competition.

Analyst Duane Pfennigwerth has recently upgraded LUV to a BUY with a target price of $55. This just might be the best time to buy LUV as the company has a strong domestic profile, solid fundamentals and a top-notch reputation amongst its loyal customer base.

United Airlines Holdings, Inc. (UAL)

When was the last time you found a stock priced at half of the analysts’ average price target?  It is quite possible you will not find such a stock across the next year or even half-decade of investing.  UAL fits this “unicorn” profile with a TipRanks’ average analyst price target of $50.90 yet a trade price of $23.97.

As detailed in this Zacks article, UAL is down an astonishing 75% in the past six months.  Though the entire airline industry is struggling, it will survive this white swan event.  UAL has been oversold, creating a tempting buying opportunity for savvy investors.

UAL’s $5 billion financial assistance in federal aid certainly increases the chances of a dead cat bounce.  This money will help cover overhead costs through September 30.  Though UAL executives have admitted they will likely have to furlough upwards of one-third of pilots and other employees, there is a good chance flights will return to at least half the pre-COVID-19 levels by the start of winter.

Swoop in after the next negative UAL news tidbit, buy UAL shares and your investment is likely to grow quite considerably if you remain patient in the months ahead.  The will be some turbulence to come yet UAL will once again resume its position as one of America’s top airlines.

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DAL shares were trading at $21.14 per share on Tuesday afternoon, down $0.87 (-3.95%). Year-to-date, DAL has declined -63.60%, versus a -9.66% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...

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