Shares of United Airlines Holdings (NASDAQ:UAL) fell about 7% in after-hours trade following the company’s Q1 guidance update. However, Bernstein analyst David Vernon sees the weakness in the shares of the airline holding company as a buying opportunity. Vernon is bullish on UAL stock. Further, his price target of $71 implies a stellar upside potential of 45.40%.
UAL’s New Guidance for Q1
UAL now expects to report an adjusted loss between $0.60 and $1 per share in Q1 compared to its previous forecast of an adjusted EPS between $0.50 and $1. Wall Street expected UAL to post earnings of $0.64 per share in Q1.
The shift in the timing of expenses related to the potential new collective bargaining agreement with employees will likely pressure its bottom line. Also, a surge in average fuel prices could remain a drag.
Nevertheless, United Airlines maintained its full-year earnings outlook and expects its EPS to be between $10 and $12.
UAL stated that the company continues to see strong demand and expects Q1 total operating revenue to increase by about 51% compared to the first quarter of 2022. This is higher than its previous forecast of a 50% year-over-year growth. However, the company witnessed a seasonality shift and saw lower demand in January and February 2023.
Notably, UAL posted total operating revenue of $7.57 billion in the first quarter of 2022. Assuming the company’s growth forecast, UAL’s revenue will likely reach $11.43 billion in Q1 of 2023. Analysts expect the company to report operating revenue of $11.47 billion in Q1.
Is UAL A Buy, Sell, or Hold?
Vernon said the company’s Q1 guidance came below the Street’s forecast. However, he added that an outsized negative response to the Q1 outlook presents a buying opportunity.
Including Vernon, nine analysts have recommended a Buy on UAL stock. Five analysts have Hold recommendations, while one analyst has a Sell rating. Overall, UAL stock commands a Moderate Buy consensus rating on TipRanks.
While analysts are cautiously optimistic, hedge funds sold 1.8M shares of UAL last quarter. Further, insiders sold UAL stock worth $1.1M in the last three months. Nevertheless, UAL carries an Outperform Smart Score of nine.
