In this article, we will take a look at 11 best airline stocks to buy according to analysts. To skip our analysis of the recent market activity, you can go directly to see the 5 Best Airline Stocks to Buy According to Analysts.
The U.S. Global Jets ETF (JETS) provides investors access to the global airline industry, including airline operators and manufacturers from all over the world. The ETF generated a performance of 11.51% in 2023, compared to 24.23% for the broader S&P 500 Index. The ETF has continued to post gains in 2024 as well and has posted a gain of nearly 7.5% year-to-date as of February 23. Our list of 11 best airline stocks to buy according to analysts includes the top 4 holdings of the ETF which account for nearly 43.7% weightage of the ETF.
The global airline industry faced one of its worst periods during the COVID-19 pandemic with travel restrictions leading to significant demand destruction. Treading through choppy waters, the industry has finally recovered from the demand destruction caused by the pandemic and is estimated to have recovered to around 107% of the pre-COVID level, according to latest IATA figures. The global industry posted cumulative losses of nearly $180 billion over the 2020-2022 period and is on track to post a net profit of $23.3 billion in 2023 with revenues of $896 billion. You can read more about this in our recently published article: 10 Airline Stocks Billionaires Are Piling Into
In the face of rising competition and lowering margins, companies in the airline industry in the United States are seeking mergers and acquisitions to increase their market share. A prime example is the planned acquisition of low-cost carrier Spirit Airlines Incorporated (NASDAQ:SAVE) by JetBlue Airways Corporation (NASDAQ:JBLU) in a $3.8 billion deal announced in July 2022. The transaction has faced significant scrutiny from regulatory authorities and was blocked in January by a United States court. The companies have filed an appeal.
Dick Forsberg, Senior Consultant to PwC’s Aviation Finance Advisory Services, made the following comments about the airline industry in a report published last month:
“Although airline profitability turned a corner in 2023, moving solidly back into the black, IATA expects only modest financial improvement in 2024, with $49bn in operating profit and a net profit of $25.75bn, held back by low yield growth, a higher cost base, especially labour costs and, at the net level, a higher debt service burden. However, the return on invested capital for airlines is still expected to come close to 5% this year and there is scope for the airlines to do better than forecast. Passenger traffic will reach or surpass 2019 levels in all regions in 2024, but recovering the four years of lost growth will take a good deal longer. Air freight markets will remain relatively weak, with a recovery in volume growth, assisted by the disruption of seaborne cargo through the canals, partially offset by soft rates. With the return of more widebody belly capacity, the dedicated freighter operators will continue to face challenges.”
Our list of 11 best airline stocks to buy according to analysts includes multibillion dollar worth bigwigs of the airline industry such as Delta Air Lines, Inc. (NYSE:DAL), Ryanair Holdings plc (NASDAQ:RYAAY), and United Airlines Holdings, Inc. (NYSE:UAL), as well as smaller airline industry players such as Brazil-base Azul S.A. (NYSE:AZUL) and ultra-low cost airline, Spirit Airlines Incorporated (NASDAQ:SAVE), among others.
Best Airline Stocks to Buy According to Analysts
A modern commercial jet airliner decorated with the company logo in flight against a clear blue sky.
Methodology
We used stock screeners to identify airline stocks with positive upside potential based on average share price targets. We then sorted the resultant dataset in ascending order of the upside potential based on average price target, as of February 20, to finalize our list of 11 best airline stocks to buy according to analysts.
A database of around 933 elite hedge funds tracked by Insider Monkey in the fourth quarter of 2023 was used to quantify the popularity of each stock in the hedge fund universe. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
Average Analyst Price Target as of February 20: $7.14
Upside Potential as of February 20: 8.18%
Number of Hedge Fund Holders: 27
Miramar, Florida-based Spirit Airlines Incorporated (NASDAQ:SAVE) is a major United States ultra-low cost airline with an all-Airbus fleet operating across the U.S., Latin America, and the Caribbean.
In July 2022, JetBlue Airways Corporation (NASDAQ:JBLU) announced a definitive agreement to acquire Spirit Airlines, Inc. (NYSE:SAVE) for a cash consideration of $33.50 per share, for an aggregate equity value of $3.8 billion. Since then, the company has been jumping through hoops to satisfy the regulatory authorities. It has agreed to divest all of the target company holdings at New York’s LaGuardia Airport to Frontier Group Holdings, Inc. (NASDAQ:ULCC), and Boston Logan International Airport and Newark Liberty International Airport holdings to Allegiant (NASDAQ:ALGT).
On January 16, the U.S. District Court for the District of Massachusetts blocked the merger after the Justice Department sued to stop the merger. The companies have filed an appeal with arguments slated to be heard by the Court of Appeals in June 2024.
As of Q4 2023, 27 hedge funds out of the 933 hedge funds tracked by Insider Monkey were bullish on Spirit Airlines Incorporated (NASDAQ:SAVE) and held its shares valued at $140 million.
Average Analyst Price Target as of February 20: $17.57
Upside Potential as of February 20: 19.52%
Number of Hedge Fund Holders: 31
Fort Worth, Texas-based American Airlines Group Inc. (NASDAQ:AAL) is a holding company operating a major network air carrier, providing scheduled air transportation for passengers and cargo through its hubs. As of December 31, 2023, it operated 965 mainline aircraft supported by its regional airline subsidiaries and third-party regional carriers, which together operated an additional 556 regional aircraft.
On January 25, American Airlines Group Inc. (NASDAQ:AAL) released its financial results for Q4 2023. It generated operating revenues of $13.1 billion and a net income of $19 million.
American Airlines Group Inc. (NASDAQ:AAL) has been on a mission to strengthen its balance sheet. As part of this plan, the company has reduced its debt level by nearly $11.4 billion from the peak levels in mid-2021. This includes debt reduction of more than $500 million in Q4 2023.
Like other stocks such as Ryanair Holdings plc (NASDAQ:RYAAY), United Airlines Holdings, Inc. (NYSE:UAL), and Delta Air Lines, Inc. (NYSE:DAL), American Airlines Group Inc. (NASDAQ:AAL) is among the 11 best airline stocks to buy according to analysts.
Average Analyst Price Target as of February 20: $166.51
Upside Potential as of February 20: 20.35%
Number of Hedge Fund Holders: 26
Ireland-based Ryanair Holdings plc (NASDAQ:RYAAY) operates a low fare, low cost scheduled airline group serving short-haul, point-to-point routes from 94 bases to airports across Europe and North Africa. It comprises several separate airlines: Ryanair DAC, Lauda, Malta Air, Buzz and Ryanair UK.
As of Q4 2023, Ryanair Holdings plc (NASDAQ:RYAAY) shares were held by 26 hedge funds. Harris Associates was the leading hedge fund investor with ownership of 5.2 million shares valued at $688 million. The company ranks highest on our list of 11 best airline stocks to buy according to analysts based on its market capitalization.
Oakmark Funds, advised by Harris Associates, made the following comments about Ryanair Holdings plc (NASDAQ:RYAAY) in its Q4 2023 “Oakmark International Fund” investor letter:
“Ryanair released strong results for the first half of fiscal-year 2024 and was accompanied by an even stronger outlook, in our view. The company’s revenue grew 30% year over year, and average fares increased by 24% to EUR 58, driven by record demand and constrained capacity at European peers. Total passengers flown expanded 11% year over year to 105.4 million, and management is on track to maintain its target of 183.5 million passengers for 2024, depending on Boeing’s ability to meet its delivery commitments. Management is expecting full-year 2024 net income to be between EUR 1.85-2.05 billion ahead of the EUR 1.82 billion consensus estimate. The company’s strong free cash flow levels and balance sheet allowed Ryanair to reinstate a EUR 400 million dividend (35 cents per share). We spoke with CEO Michael O’Leary about additional uses for its excess capital and were happy to hear about an incremental EUR 1.5 billion return to shareholders starting in 2025. We continue to be optimistic about Ryanair’s future.”
Average Analyst Price Target as of February 20: $50.36
Upside Potential as of February 20: 29.39%
Number of Hedge Fund Holders: 34
Seattle, Washington-based Alaska Air Group, Inc. (NYSE:ALK) is an airline holding company that operates two airlines, Alaska, and Horizon, and McGee Air Services, an aviation services provider. Alaska operates a fleet of narrowbody passenger jets on primarily longer stage-length routes. It contracts with Horizon and SkyWest for shorter-haul capacity and receives all passenger revenue from those flights.
On December 3, Alaska Air Group, Inc. (NYSE:ALK) and Hawaiian Holdings, Inc. (NASDAQ:HA) announced an agreement under which Alaska Air Group, Inc. (NYSE:ALK) will acquire all outstanding shares of Hawaiian Holdings, Inc. (NASDAQ:HA) for a cash consideration of $18.00 per share which implies a transaction equity value of nearly $1.0 billion.
Alaska Air Group, Inc. (NYSE:ALK) expects to finance the acquisition through cash on hand and new debt with the transaction expected to close in 12-18 months, subject to regulatory clearance and approval from target company shareholders. The company expects $235 million of run-rate synergies and expects “high single digits accretion to earnings within first two years.”
As of Q4 2023, according to the Insider Monkey data on 933 leading hedge funds, 34 hedge funds were long Alaska Air Group, Inc. (NYSE:ALK), the third highest on our list of 11 best airline stocks to buy according to analysts. Ric Dillon’s Diamond Hill Capital was the largest hedge fund shareholder with ownership of 1.2 million shares valued at $46 million.
7. Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY)
Average Analyst Price Target as of February 20: $20.14
Upside Potential as of February 20: 30.78%
Number of Hedge Fund Holders: 15
Minneapolis, Minnesota-based Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) is a hybrid low-cost air carrier focused on serving leisure and visiting friends and relatives passengers and charter customers and providing cargo service to Amazon.
On January 31, Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) released its financial results for Q4 2023. Its total operating revenue increased by 8% y-o-y to $245 million while net income decreased by 22% y-o-y to $6 million.
According to Insider Monkey data on 933 hedge funds, 15 hedge funds held shares of Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY), valued at $112 million, as of Q4 2023. Its lead hedge fund shareholder was PAR Capital Management with ownership of 2.8 million shares valued at $44 million.
Average Analyst Price Target as of February 20: $53.89
Upside Potential as of February 20: 32.73%
Number of Hedge Fund Holders: 53
Delta Air Lines, Inc. (NYSE:DAL) is a leading global airline serving more than 200 million passengers on an annual basis across its global network of more than 280 destinations across six continents. The company employs more than 100,000 people and operates over 4,000 daily flights.
As of Q4 2023, Delta Air Lines, Inc. (NYSE:DAL) shares were owned by 53 prominent hedge funds tracked by Insider Monkey, the highest on our list of 11 best airline stocks to buy according to analysts. Thomas E. Claugus’ GMT Capital was the lead hedge fund investor with ownership of 6.8 million shares valued at $273 million.
In its Q3 2023 investor letter, Patient Capital Management, a value investing firm, made the following comments about Delta Air Lines, Inc. (NYSE:DAL):
“Historically, airlines have passed on higher fuel prices to customers with a lag. We see Delta as a premium global consumer brand that is materially misunderstood by the market. The market still sees airlines as a cyclical, bankruptcy prone industry. An improved supply-demand picture, management discipline and a better business mix make Delta a more resilient business. Their loyalty program with American Express is a source of stable and growing revenues with $6.5B in remunerations this year with a goal of reaching $10B by the end of the contract in 2028. Premium and ancillary service revenue should generate 65-70% of the total in the next year or two. The company should continue to generate consistent midteens returns on capital. As the market begins to understand, we believe the company will continue to be rewarded. On top of this, free cash flow is expected to expand generating a cumulative ~$11B from ’23-’25, or one-half of its current market cap. As the company pays down debt while growing the dividend and eventually resuming share repurchases, we think the stock will continue to trend higher.”
