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Airline Stocks: Wall Street Is Bearish, Cuts Fiscal 2020 Estimates

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Airline stocks’ performance has gone downhill since the COVID-19 pandemic hit. Most industries were hit, but the travel industry took a bigger blow. The Street stated that the industry trade group estimates that global airline sales could fall by $314 billion this year. Airline stocks are trading in the red. In April, United Airlines (NYSE:UAL) has declined by 18.45, while Delta Air Lines (NYSE:DAL) has fallen by 21.2%. Meanwhile, American Airlines (NASDAQ:AAL), Southwest Airlines (NYSE:LUV), and Spirit Airlines (NASDAQ:SAVE) have fallen by 15.9%, 15.3%, and 8.4% in April.

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Wall Street bearish on airlines stocks

Since the pandemic started, the travel demand has been hit hard due to restrictions, lockdowns, and self-quarantine rules imposed by health authorities. United Airlines reported losses of $2.1 billion in its first-quarter preliminary results announced on Monday. The company also had to sell 22 planes to BOC Aviation to survive the current cash crunch. Later this week, Delta followed suit and reported lower revenues and higher losses in its first quarter. To learn more, read Delta Air Lines: Q1 Losses Depict Airline Industry’s Struggles.

The airline industry’s struggles are evident in declining stock prices. Wall Street analysts are bearish about most of these stocks. As a result, analysts reduced their target prices. After Delta’s results, JPMorgan Chase cut the target price for the stock to $45 from $46. Raymond James cut the target price to $36 from $40, while Evercore ISI reduced the target price to $30 from $35. Cowen and Company cut the target price for Delta to $33 from $35. However, Stifel raised the target price to $45 from $43.

On April 24, Berenberg also cut the target price for Delta to $35 from $45, while UBS reduced the target price to $21 from $7.

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More price reductions in April

After United Airlines reported its preliminary results, Deutsche Bank cut the target price to $54 from $60. Cowen and Company also cut the target price to $30 from $37. Citigroup reduced the target price to $44 from $51.

Cowen and Company also cut the target price for American Airlines to $15 from $17, while Deutsche Bank cut the target price to $18 from $21. Deutsche Bank cut the target price for Southwest Airlines to $45 from $46. Meanwhile, Cowen and Company cut the price for Southwest to $40 from $45. Citigroup reduced its target price to $35 from $40 for Southwest. Deutsche Bank cut the target price for Spirit Airlines to $24 from $26.

Analysts cut estimates for fiscal 2020 in April

Looking at the current situation in the airline industry, analysts also reduced the fiscal 2020 revenue estimates for most airline companies. Let’s take a look at the month-over-month estimate revisions for fiscal 2020. Starting with United Airlines, analysts hope that it will report $24.1 billion for fiscal 2020 compared to an estimate of $29.5 billion in March. Analysts expect Delta to report lower sales of $22.0 billion compared to $32.0 billion in March.

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American Airlines could also report lower revenues of $24.5 billion, which is lower than the March estimate of $31.6 billion. Analysts expect Southwest to record revenue of $12.4 billion compared to $17.6 billion in March. Spirit could report revenue of $2.3 billion, which is lower than $3.7 billion estimates in March.

Higher losses expected for fiscal 2020 from the airline industry

Analysts also expect higher losses from the industry in fiscal 2020. They hope that United will report s loss of $4.3 billion for fiscal 2020 compared to the loss estimate of $911 million in March. Meanwhile, analysts expect Delta to report higher losses of $3.4 billion compared to $98 million in March.

American Airlines could also record losses of $6.0 billion compared to losses of $1.2 billion in March. Analysts expect Southwest to record losses of $1.4 billion compared to a profit of $592 million in March. Spirit could report a loss of $387 million compared to a profit of $341 million estimated in March.

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