United Airlines: Losses Could Reverse Despite Soft Q1 Guidance

When you’re buying stocks and shares, it’s inevitable that you’ll sometimes buy shares in companies that are struggling. But that’s not necessarily a bad thing. In fact, buying struggling stocks can be a great way to make money.

Buying struggling and distressed stocks are one of the best investment strategies legendary investors and hedge fund managers have been using over the decades to beat the market indices.

United Airlines (NYSE: UAL) is presenting a once in a decade buying opportunity for value investors as shares of the Chicago based airline are still down 50% in the last twelve months despite rallying 30% in the last three months.

In addition to the distressed stock price, the market fundamentals for the airline industry improved significantly amid coronavirus vaccine discovery.

Why Is United Airlines a Good Stock to Buy?

Although the airline industry saw massive growth in travellers demand at the beginning of this year, the market pundits expect a more sustained recovery to begin by the end of the first quarter.

“We would expect trends to pullback until the vaccines roll out in the next few months before we see a more sustained recovery beginning into March/April. Important to note is this data represents gross bookings data and does not capture cancellation activity, potentially suggesting actual trends could be slightly worse than what we are seeing. Importantly, the uptick in December trends was driven primarily by leisure travel,”

UBS said.

Governments all over the world have aggressively been rolling out their vaccination program to stop the virus spread while airlines are making it compulsory for travellers to present a coronavirus test before travelling. All these factors are suggesting that the airline industry will see substantial improvement in passengers demand in the days ahead.

Buy United Airlines For the Long-term

Despite improving fundamentals, the airline companies are likely to take a longer time to reach the post COVID levels.

This means that airline stocks are likely to experience steady growth in the share price instead of rapid growth. Cost-cutting and operational efficiencies would also play a big role in bringing airline companies back towards profitability.