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A Susquehanna analyst downgraded United Airlines Holdings Inc (NASDAQ:UAL) to Neutral from Positive with a $35 per share price target, down from $43.
The analyst is worried that the operating headwinds outlined by the company “could get worse before they get better.” This should be seen in the context of an economic slowdown into 2023.
“While the updates to FY22-23 guidance for carriers that have reported thus far (for DAL, UAL, AAL, and ALK, capacity lower, with unit costs higher) admittedly came earlier than we expected, our view coming into earnings season was that guidance for the group would likely be revised (operational challenges, higher fuel, and tight labor all pointed to a markdown in inventory), with revisions then helping to reinvigorate the stocks,” the analyst wrote in a client note.
“While the updates to the capacity guides thus far look reasonable, we do not believe they are one and-done, with FY23 estimates therefore not fully de-risked (consensus looks to be ‘zombie’ modeling to guidance or in some cases, flying directly through any economic slowdown).”
On a more positive side, the analyst once again praised CEO Scott Kirby and called him a “top” executive, while also being positive about the company’s “viable” strategy. However, the analyst sees a better risk-reward setup in Delta Airlines (NYSE:DAL) shares.
UAL shares are down over 2% today.
