5 Best Airline Stocks To Buy Now

In this article, we discuss 5 best airline stocks to buy now. If you want to see more stocks in this selection, check out 11 Best Airline Stocks To Buy Now. 

5. American Airlines Group Inc. (NASDAQ:AAL)

Number of Hedge Fund Holders: 30

American Airlines Group Inc. (NASDAQ:AAL) is a Texas-based network air carrier. The airline has hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington. In Q3 2022, American Airlines Group Inc. (NASDAQ:AAL) posted $0.69 in earnings per share, which was $0.13 ahead of estimates. A 50.1% jump in revenue from the prior year was in-line with estimates, but the revenue set a quarterly record and came in 13% above the same period in 2019. American Airlines Group Inc. (NASDAQ:AAL) is one of the top airline stocks to consider. 

Citi analyst Stephen Trent maintained a Neutral rating on American Airlines Group Inc. (NASDAQ:AAL) but lowered the price target on the shares to $15 from $16 on October 17. The analyst maintained a constructive view on the airline sector’s revenue recovery, noting that international corridors are recovering and loyalty programs are thriving, but he acknowledged that his earlier 2023 fuel price assumptions were optimistic.

According to Insider Monkey’s data, 30 hedge funds were long American Airlines Group Inc. (NASDAQ:AAL), compared to 28 funds in the last quarter. Jim Simons’ Renaissance Technologies is a prominent stakeholder of the company, with approximately 8 million shares worth $100.8 million. 

4. Alaska Air Group, Inc. (NYSE:ALK)

Number of Hedge Fund Holders: 30

Alaska Air Group, Inc. (NYSE:ALK) was founded in 1932 and is based in Seattle, Washington. The company provides passenger and cargo air transportation services, operating through three segments – Mainline, Regional, and Horizon. On October 20, Alaska Air Group, Inc. (NYSE:ALK) reported a Q3 non-GAAP EPS of $2.53 and a revenue of $2.83 billion, topping Street estimates by $0.14 and $10 million, respectively. The revenue increased 45.1% on a year-over-year basis. 

On October 21, Cowen analyst Helane Becker reiterated an Outperform rating on Alaska Air Group, Inc. (NYSE:ALK) but slashed the price target on the shares to $65 from $85. The analyst said that it is one of the first airlines to reach a labor agreement with its pilots and the higher wages will add 4 basis points to unit costs in Q4 2022.

According to Insider Monkey’s Q2 data, 30 hedge funds were long Alaska Air Group, Inc. (NYSE:ALK), with combined stakes worth $253.7 million. PAR Capital Management is the largest stakeholder of the company, with 1.7 million shares valued at $68.80 million. 

Here is what White Brook Capital has to say about Alaska Air Group, Inc. (NYSE:ALK) in its Q1 2021 investor letter:

“Despite initiating a position in the fourth quarter, Alaska Airlines Group, Inc (ALK) was sold during the first quarter. The Alaska Airlines investment was envisioned to be a long-term investment, but the stock price appreciated more quickly than expected. Like many other “re-open trades”, the value of the company including its debt now exceeds the value pre-pandemic. For that to be reasonable I’d have to believe:

1) The company/industry had too little debt and by adding debt they’ve better optimized their balance sheet for equity returns while still maintaining downside resiliency;

2) The company/industry’s profitability will be better moving forward than it was pre-pandemic and therefore warrant a higher multiple; and/or

3) The company/industry was significantly mispriced before the pandemic.

The first was true of Alaska Airlines pre-pandemic, but the certainty one can have about the second and third is not high enough to compel continued investment at today’s prices. The intended long-term position turned into a short-term trade with an exceptional IRR.”

3. United Airlines Holdings, Inc. (NASDAQ:UAL)

Number of Hedge Fund Holders: 35

United Airlines Holdings, Inc. (NASDAQ:UAL) is headquartered in Chicago, Illinois, providing air transportation services in North America, Asia, Europe, Africa, the Pacific, the Middle East, and Latin America. On October 18, United Airlines Holdings, Inc. (NASDAQ:UAL) reported a Q3 non-GAAP EPS of $2.81 and a revenue of $12.88 billion, outperforming market estimates by $0.53 and $140 million, respectively. Revenue for the period climbed 66.2% year-over-year. Q4 2022 optimism was fueled by robust revenue and improving cost trends. 

Citi analyst Stephen Trent on October 21 raised the price target on United Airlines Holdings, Inc. (NASDAQ:UAL) to $65 from $56 and maintained a Buy rating on the shares. The analyst said concerns about a U.S. economic slowdown create an “interesting contrast” to United Airlines Holdings, Inc. (NASDAQ:UAL) posting resilient Q3 revenue, guiding Q4 earnings more than double the Street consensus, and reaffirming its 2023 pre-tax margin target of 9%.

Among the hedge funds tracked by Insider Monkey, 35 funds were long United Airlines Holdings, Inc. (NASDAQ:UAL) at the end of Q2 2022, compared to 31 funds in the preceding quarter. Israel Englander’s Millennium Management is a significant position holder in the company, with 3.5 million shares worth $126 million. 

2. Southwest Airlines Co. (NYSE:LUV)

Number of Hedge Fund Holders: 46

Southwest Airlines Co. (NYSE:LUV) is a Texas-based passenger airline company that provides scheduled air transportation services in the United States and closeby international markets. On October 31, Morgan Stanley categorized Southwest Airlines Co. (NYSE:LUV) as a top pick in the airline sector given its solid franchise, management team, fortress balance sheet, and exposure to the rising tide in both leisure and corporate travel. Morgan Stanley also believes that Southwest Airlines Co. (NYSE:LUV) will stand out as investors pile into the airline sector again. 

On October 11, Susquehanna analyst Christopher Stathoulopoulos maintained a Positive rating on Southwest Airlines Co. (NYSE:LUV) but slashed the price target on the shares to $40 from $45. The analyst said while he remains optimistic on the shares, he believes that the relative outsized growth might be hard to come by, with unit economics pressured into 2023.

According to Insider Monkey’s data, 46 hedge funds were bullish on Southwest Airlines Co. (NYSE:LUV) at the end of June 2022, compared to 45 funds in the last quarter. Steve Cohen’s Point72 Asset Management is a prominent stakeholder of the company, with 2.25 million shares worth $81.3 million. 

Here is what ClearBridge Investments has to say about Southwest Airlines Co. (NYSE:LUV) in its Q1 2021 investor letter:

“One of our goals as we constantly monitor the portfolio is to see if we can better deploy capital by lowering the probability of being wrong. This motivation drove our swap of Delta Airlines into Southwest Airlines during the quarter. We expect a huge rebound in airline traffic as COVID-19 concerns abate, but we are much more comfortable that it will be led by leisure travel. Conversely, we are more uncertain of the ultimate level and timing of business travel demand. Southwest, with its simple fare strategy and high leisure travel exposure, is better positioned to capture the ongoing traffic rebound without having to answer the business travel demand question on which Delta is more dependent. As a result, we expect Southwest to play serious offense as it gains share in the rebounding travel market and can fully leverage the massive pent-up demand for travel that we expect. In addition, the U.S. lead in vaccination over Europe favors Southwest over Delta, given the domestic focus of Southwest. COVID-19 has changed many things, but humans by their very nature like to move, and many of them will do it on Southwest.”

1. Delta Air Lines, Inc. (NYSE:DAL)

Number of Hedge Fund Holders: 49

Delta Air Lines, Inc. (NYSE:DAL) is a Georgia-based company that provides air transportation for passengers and cargo in the United States and internationally. In Q3 2022, Delta Air Lines, Inc. (NYSE:DAL) reported a revenue of $13.98 billion, up 52.8% from the prior-year quarter and beating market estimates by $360 million. For Q4 2022, the airline expects capacity to be up nearly 5% to 9% compared to Q4 2019 and earnings per share between $1 to $1.25 versus a consensus of $0.80. Delta Air Lines, Inc. (NYSE:DAL) is on track to achieve 2024 targets of an adjusted EPS of more than $7 and $4 billion of free cash flow. Delta Air Lines, Inc. (NYSE:DAL) is one of the best airline stocks to buy now. 

On October 24, Jefferies analyst Sheila Kahyaoglu raised the price target on Delta Air Lines, Inc. (NYSE:DAL) to $40 from $35 and kept a Buy rating on the shares. Delta TechOps is the biggest airline MRO provider in North America and the third largest globally, noted the analyst, who views TechOps as “a competitive advantage for Delta”. The MRO business generates about $1 billion of external sales, but adds $4 billion of production value to the airline, added the analyst, who believes the business could be valued at $10 billion on a standalone basis.

Among the hedge funds tracked by Insider Monkey, 49 funds were bullish on Delta Air Lines, Inc. (NYSE:DAL) at the end of Q2 2022, compared to 55 funds in the last quarter. Alex Snow’s Lansdowne Partners is a significant position holder in the company, with 4.6 million shares worth $132.35 million. 

Here is what Miller Value Partners specifically said about Delta Air Lines, Inc. (NYSE:DAL) in its Q3 2022 investor letter:

“Delta Air Lines, Inc. (NYSE:DAL) ($29.42) is a high-quality airline (yes, there really is such a thing!).  It didn’t issue any equity in the pandemic. It focuses on delivering a superb customer experience and has brand loyalty (including a stable revenue stream from partner American Express, growing at 20%/ year). Maybe the best evidence: it’s managed to outperform the S&P 500 over the past decade despite a horrible pandemic ending point (+13.2% vs. 11.7%1 ). It trades for 4x 2024 earnings! If it eventually trades at Southwest’s historical valuation, it implies this stock should double as well.”

You can also take a look at 15 Best Strong Buy Stocks To Invest In and Best Biotech Stocks Under $10. 

Follow Insider Monkey on Twitter