11 Best Aviation Stocks To Buy According To Analysts
In this article, we discuss 11 best aviation stocks to buy according to analysts. If you want to skip our discussion on the aviation industry, head over to 5 Best Aviation Stocks To Buy According To Analysts.
The International Air Transport Association (IATA) released its outlook for the airline industry in December last year, projecting a higher profitability trajectory for full-year 2023 with further stabilization anticipated in 2024. The overall aviation landscape in 2024 is expected to witness a notable increase in revenues, which will outweigh expenses. Industry revenues are forecasted to reach a historic high of $964 billion, fueled by a growth rate of 7.6%, while expenses are projected to rise at a slightly slower pace of 6.9%. This positive trajectory is expected to strengthen the profitability of the airline sector. Passenger revenues are a significant driver of this growth, anticipated to reach $717 billion in 2024, marking a 12% increase from the previous year.
On the cargo front, revenues are projected to decline to $111 billion in 2024. This decrease is attributed to the impact of increased belly capacity on the passenger side of the business, coupled with stagnation in international trade. IATA listed down several factors that pose both positive and negative risks to the fragile profitability of the aviation industry. Global economic developments, including inflation, low unemployment rates, and demand for travel, are considered positive factors. However, economic strains in regions like China, if not managed properly, could impact global business cycles. Additionally, ongoing conflicts, such as the Ukraine war and the Israel-Hamas war, have operational and cost implications for the industry, particularly in terms of oil prices.
Willie Walsh, IATA’s Director General, commented:
“Considering the major losses of recent years, the $25.7 billion net profit expected in 2024 is a tribute to aviation’s resilience. People love to travel and that has helped airlines to come roaring back to pre-pandemic levels of connectivity. The speed of the recovery has been extraordinary; yet it also appears that the pandemic has cost aviation about four years of growth. From 2024 the outlook indicates that we can expect more normal growth patterns for both passenger and cargo. Industry profits must be put into proper perspective. While the recovery is impressive, a net profit margin of 2.7% is far below what investors in almost any other industry would accept. Of course, many airlines are doing better than that average, and many are struggling. But there is something to be learned from the fact that, on average airlines will retain just $5.45 for every passenger carried. That’s about enough to buy a basic ‘grande latte’ at a London Starbucks. But it is far too little to build a future that is resilient to shocks for a critical global industry on which 3.5% of GDP depends and from which 3.05 million people directly earn their livelihoods. Airlines will always compete ferociously for their customers, but they remain far too burdened by onerous regulation, fragmentation, high infrastructure costs and a supply chain populated with oligopolies.”
Fitch Ratings has a Neutral outlook for the global airline sector in 2024. Despite global traffic approaching pre-pandemic levels, it still lags behind historical trends. Fitch also observed Chinese international traffic is notably below 2019 levels but has potential for growth. Business travel, which faced challenges in 2023, is displaying signs of recovery. Additionally, full-service carriers are expected to sustain positive trends in premium products, experiencing notable growth post-pandemic.
The airline industry has been experiencing waves of M&A activity recently. Airline consolidation is a common and essential strategy for growth and competitiveness, as demonstrated by Alaska Airlines' announcement to acquire Hawaiian Airlines for $1.9 billion back in December 2023. This move is not just a business transaction but a strategic positioning for future growth in the highly competitive and concentrated airline sector. Upon completion of the deal, the combined market share of Alaska and Hawaiian will be around 8.2%, making them the fifth-largest U.S. airline, unless JetBlue Airways successfully acquires Spirit Airlines.
Some of the best airline stocks to buy in order to benefit from the growth potential in the aviation industry include Delta Air Lines, Inc. (NYSE:DAL), United Airlines Holdings, Inc. (NASDAQ:UAL), and American Airlines Group Inc. (NASDAQ:AAL).
Our Methodology
We shortlisted the top airline stocks by considering their upside potential, relying on analyst price targets as of March 3. The price targets were taken from Yahoo Finance. We have assessed the hedge fund sentiment from Insider Monkey’s database of 933 elite hedge funds tracked as of the end of the fourth quarter of 2023. The list is arranged in ascending order of the number of hedge fund holders in each firm. 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).
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Best Aviation Stocks To Buy According To Analysts
11. Frontier Group Holdings, Inc. (NASDAQ:ULCC)
Number of Hedge Fund Holders: 12
Average Upside Potential: 11.90%
Average Analyst Price Target: $10.8
Frontier Group Holdings, Inc. (NASDAQ:ULCC) offers affordable air travel services to leisure travelers in the United States and Latin America. The company was founded in 1994 and is based in Denver, Colorado. In 2024, Frontier Group Holdings, Inc. (NASDAQ:ULCC) anticipates a 12% to 15% growth in capacity compared to 2023. Fuel costs are projected to range from $2.70 to $2.80 per gallon based on the blended fuel curve as of February 2, 2024. Pre-delivery deposits, net of refunds, are estimated to be between $20 and $50 million, and other capital expenditures are forecasted to be in the range of $160 to $180 million.
According to Insider Monkey’s fourth quarter database, 12 hedge funds were bullish on Frontier Group Holdings, Inc. (NASDAQ:ULCC), compared to 13 funds in the last quarter. Quincy Lee’s Ancient Art (Teton Capital) is the largest stakeholder of the company, with 8.6 million shares worth $47.3 million.
Like Delta Air Lines, Inc. (NYSE:DAL), United Airlines Holdings, Inc. (NASDAQ:UAL), and American Airlines Group Inc. (NASDAQ:AAL), Frontier Group Holdings, Inc. (NASDAQ:ULCC) is one of the best airline stocks to invest in.
10. Controladora Vuela Compa?ía de Aviación, S.A.B. de C.V. (NYSE:VLRS)
Number of Hedge Fund Holders: 12
Average Upside Potential: 56.81%
Average Analyst Price Target: $12.82
Controladora Vuela Compa?ía de Aviación, S.A.B. de C.V. (NYSE:VLRS) provides air transportation services for passengers, cargo, and mail in Mexico, the United States, Central America, and South America. On February 26, Controladora Vuela Compa?ía de Aviación, S.A.B. de C.V. (NYSE:VLRS) reported a Q4 EPADS of $0.97 and a revenue of $899 million, up 9.6% year-over-year and beating Wall Street estimates by $17.76 million. Controladora is one of the best airline stocks to invest in.
According to Insider Monkey’s fourth quarter database, 12 hedge funds were long Controladora Vuela Compa?ía de Aviación, S.A.B. de C.V. (NYSE:VLRS), compared to 14 funds in the earlier quarter. Michael Moriarty’s Teewinot Capital Advisers is the biggest stakeholder of the company, with 3.2 million shares valued at $30.2 million.
9. Azul S.A. (NYSE:AZUL)
Number of Hedge Fund Holders: 13
Average Upside Potential: 102.16%
Average Analyst Price Target: $15.14
Azul S.A. (NYSE:AZUL) ranks 9th on our list of the best airline stocks to buy. Azul S.A. (NYSE:AZUL) offers scheduled air transportation services in Brazil, operating around 1,000 daily departures to 158 destinations. Azul is engaged in cargo transportation, loyalty programs, travel packages, funding, logistics solutions, and aircraft financing. On January 25, Azul S.A. (NYSE:AZUL) announced that it has initiated a codeshare agreement with Silver Airways in the United States. This collaboration allows customers to purchase tickets for Silver Airways flights in the United States directly through Azul's sales channels. The agreement enables seamless connectivity for customers traveling from Brazil to Azul's Fort Lauderdale and Orlando destinations, providing access to major tourism and business centers.
According to Insider Monkey’s fourth quarter database, 13 hedge funds were bullish on Azul S.A. (NYSE:AZUL), same as the prior quarter. Howard Marks’ Oaktree Capital Management is the largest stakeholder of the company, with 1.58 million shares worth $15.3 million.
8. Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY)
Number of Hedge Fund Holders: 15
Average Upside Potential: 28.87%
Average Analyst Price Target: $20.14
Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) is an air carrier company operating scheduled passenger, air cargo, and charter air transportation services in the United States, Latin America, and internationally. It is one of the best airline stocks to consider buying.
On February 26, Morgan Stanley upgraded Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) stock from Equal Weight to Overweight, expressing a positive outlook on the airline's three segments – Passenger, Amazon Cargo, and Charter. Morgan Stanley considers Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) to be the most defensively positioned ultra-low-cost carrier in the sector, citing significant upside potential. Morgan Stanley set a price target of $21 for the shares.
According to Insider Monkey’s fourth quarter database, 15 hedge funds were bullish on Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY), compared to 16 funds in the last quarter. Paul Reeder and Edward Shapiro’s PAR Capital Management is the leading stakeholder of the company, with 2.76 million shares worth $43.5 million.
7. Allegiant Travel Company (NASDAQ:ALGT)
Number of Hedge Fund Holders: 17
Average Upside Potential: 19.78%
Average Analyst Price Target: $86.10
Allegiant Travel Company (NASDAQ:ALGT) ranks 7th on our list of the best airline stocks. It is a leisure travel company based in Las Vegas, specializing in providing travel services and products to residents of under-served cities in the United States. The company focuses on scheduled air transportation with limited-frequency, nonstop flights between under-served cities and popular leisure destinations. On February 5, Allegiant Travel Company (NASDAQ:ALGT) reported a Q4 non-GAAP EPS of $0.11 and a revenue of $611 million, outperforming Wall Street estimates by $0.31 and $16.37 million, respectively.
According to Insider Monkey’s fourth quarter database, 17 hedge funds were bullish on Allegiant Travel Company (NASDAQ:ALGT), compared to 19 funds in the earlier quarter. Ric Dillon’s Diamond Hill Capital is the largest stakeholder of the company, with 847,167 shares valued at $70 million.
Diamond Hill Small Cap Fund made the following comment about Allegiant Travel Company (NASDAQ:ALGT) in its Q3 2023 investor letter:
“Other bottom contributors in Q3 included Rimini Street, Lancaster Colony Corporation and Allegiant Travel Company (NASDAQ:ALGT). Packaged food products manufacturer Lancaster Colony and regional airline Allegiant Travel underperformed in Q3 against a weakening consumer backdrop as well as, for Allegiant, an unfavorable pricing environment.”
6. Air Transport Services Group, Inc. (NASDAQ:ATSG)
Number of Hedge Fund Holders: 19
Average Upside Potential: 45.13%
Average Analyst Price Target: $20.17
Air Transport Services Group, Inc. (NASDAQ:ATSG) operates in the aircraft leasing and air cargo transportation sectors, providing services both in the United States and internationally. On February 27, Air Transport Services Group, Inc. (NASDAQ:ATSG) reported a Q4 non-GAAP EPS of $0.18, falling short of Wall Street estimates by $0.14. The revenue came in at $517.04 million, beating market consensus by $9.04 million. Capital spending in 2024 is estimated at $410 million, down $380 million from 2023.
According to Insider Monkey’s fourth quarter database, 19 hedge funds were bullish on Air Transport Services Group, Inc. (NASDAQ:ATSG), same as the prior quarter. D E Shaw is the largest stakeholder of the company, with 1.3 million shares worth $23.5 million.
Like Delta Air Lines, Inc. (NYSE:DAL), United Airlines Holdings, Inc. (NASDAQ:UAL), and American Airlines Group Inc. (NASDAQ:AAL), Air Transport Services Group, Inc. (NASDAQ:ATSG) is one of the best airline stocks to consider. It ranks 6th on our list.
Bernzott Capital Advisors made the following comment about Air Transport Services Group, Inc. (NASDAQ:ATSG) in its second quarter 2023 investor letter:
“Air Transport Services Group, Inc. (NASDAQ:ATSG): The company’s elevated capital spending plans through next year extend its heavy capex cycle and will impede a free cash flow recovery. As a result, we exited the position.”
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Disclosure: None. 11 Best Aviation Stocks To Buy According To Analysts is originally published on Insider Monkey.