Mesa Air Group (MESA) traded between $3 and $4 in the months following the onset of the coronavirus pandemic. The stock broke out this past November, shooting up to $5, rising to $7 in December, and soaring all the way to $12 in February of the new year.

MESA, a passenger and commercial aviation company, is the airline industry’s best performing stock in recent months. A large part of MESA’s success is attributable to the fact that it has long-term contracts in place with some of the top airlines with a pricing structure that minimizes risk. Furthermore, MESA is primarily a regional carrier, meaning its flights are more likely to move forward as planned regardless of the course of the pandemic. The same cannot be said for international flights.

The majority of the airline stocks may continue to struggle in the months ahead as we attempt to reach herd immunity through vaccination. However, there is also the potential for that much more money to pour into regional airline stocks such as MESA as we gradually return to normal.

Is MESA’s dramatic ascension justified? Where does MESA go from here? Let’s find out.

Why MESA is on the Rise

MESA’s recent operating performance revealed a total of 25,359 block hours in January of ’21, a 33% decline from January of ’20. However, the economy contracted so the decline was expected. This regional airliner provides passenger service to 100+ cities across nearly 40 states along with commercial flights. MESA flights are operated through United Express, DHL Express, and American Eagle.

A respected Wall Street analyst awarded MESA with a double upgrade, an endorsement that sent the stock significantly higher. Though airlines have had a difficult year, MESA isn’t as vulnerable to the shrinking economy and virus-weary travelers as it has contracts in place with larger partners highlighted by a fee-for-service model that has mitigated potential losses during the pandemic.

The Analysts’ View of MESA

Investors are also flocking to MESA as the company recorded a first-quarter profit that was significantly higher than Wall Street analysts expected. As a result, Andrew Didora, an analyst with Bank of America, boosted his price target for the stock from Underperform to Buy. Didora’s current price target for the stock is $15. Didora’s prior price target for MESA was a mere $2. Didora’s logic in boosting MESA’s price target is the company is receiving ample government support and its multi-year contracts with American Airlines and United Airlines position the company for success even if the virus continues to linger.

MESA has been analyzed in-depth by nearly half a dozen analysts. The average price target for the stock is $10.30. The analysts have established a high target price of $15 for the stock. The analysts’ low target price for MESA is $11. Of the five analysts who have issued recommendations, two consider MESA a Buy, two consider it a Hold and one considers it a Strong Buy.

MESA’s POWR Ratings

MESA has B grades in the Quality, Sentiment, Value, and Growth components of the POWR Ratings. Investors who would like to learn more about how MESA fares in terms of the Stability and Momentum components can obtain that information by clicking here.

Of the 27 publicly traded companies in the Airlines sector, MESA is ranked first. However, it must be noted the Airline industry as a whole has an F rating. If you are interested in learning more about the Airlines industry, click here.

MESA Moving Forward

MESA still has a fairly low forward P/E ratio of 12.31, meaning it is likely undervalued at its current trading price of around $12. The stock is still trading below Didora’s price target of $15. The economy will eventually recover, buoying MESA all the more yet there is no concrete timetable for the economic bounce-back.

If you want an airliner in your portfolio, you should give serious consideration to adding MESA, especially if it pulls back in the days or weeks ahead following its rapid ascension. If MESA dips to $9 or less and you want exposure to the airlines in your portfolio for sufficient diversification, consider establishing a position in the stock at that point.