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Should You Buy United Continental Holdings Inc (UAL) Stock? 3 Pros, 3 Cons

After United's atrocious controversy, the pros and cons of UAL stock just got interesting

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Unless you’ve been living under a rock, then you know that United Continental Holdings Inc (NYSE:UAL) is under fire for forcefully removing a passenger from its flight. The passenger, Dr. David Dao, refused to vacate his seat at the request of UAL, which needed to fly its employees. He claimed that he had patients to see the next morning, and could not leave the flight.

Should You Buy United Continental Holdings Inc (UAL) Stock? 3 Pros, 3 Cons
Source: Shutterstock

United Continental, rather than doing something logical like calling the captain or raising the monetary incentive, instead called security. What occurred next shocked and upset not only the nation, but the entire world.

After a brief talk, security personnel grabbed Dr. Dao, forcing him out of his seat. In the process, the doctor hit his head, and appeared to be knocked unconscious. Finally, a security agent dragged him out like an animal, to the shrieks of passersby.

When you thought things couldn’t get any worse for United, CEO Oscar Munoz happily proved us all wrong. Initially, Munoz apologized for “re-accommodating” Dr. Dao, which rightfully led to social media derision. Bizarrely, in an internal email to United Continental employees, Munoz described Dao as “disruptive and belligerent.” After it was apparent that the Negan-style beat down was not “fake news,” Munoz apologized, finally, for the “truly horrific” incident.

UAL stock, United Continental, controversy
Source: Julia Enomoto

Inevitably, United Continental will be hit with one of the biggest lawsuits in corporate history.

United would be wise to not make too much of a fuss, and settle out of court. But how would UAL stock absorb this hellish week? Is this an opportunity to buy a suddenly undervalued company, or is there more pain to come?

Let’s take a look at the three pros and three cons for UAL stock.

UAL Stock Pros

Apathy: The outrage against United Continental was palpable as soon as the video of an unconscious Dr. Dao surfaced. When UAL was slow to accept responsibility, the crescendo of fury was impossible to ignore. People took to Twitter Inc (NYSE:TWTR) to boycott United. Some demanded Munoz’s head, while others celebrated the volatility in UAL stock. But we Americans are an apathetic bunch, and the 24-hour news cycle all but guarantees that sooner or later, another company will do something foolish enough to make us forget about United’s scandal.

Consolidation: For years, airliners have struggled with stiff competition and a dragging economy. In response to these pressures, many companies merged to form “super-liners.” Thus, it’s United Continental, not United and Continental. This strategy helps struggling outfits better thrive in a declining industry. Unfortunately, for the passengers, it hasn’t necessarily been a welcome change. One of the problems is the lack of options. Some routes are so uneconomical in the grand scheme of things that only one or a handful fly them. So a boycott would hurt everyday passengers more than it would UAL stock.

Money: At the end of the day, money talks and the smelly stuff walks. And boy, does United Continental have plenty of money. At last check, UAL has more than $4.4 billion. It’s also one of the more profitable airlines and the company is consistently growing the top line. Again, if management is smart, they’ll work with Dr. Dao and his attorneys. Millions of dollars upfront. Free first-class airfare for his family for life. A shock-and-awe offer of generosity could quiet the mob scene and get UAL stock back on the right track.

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Article printed from InvestorPlace Media, http://investorplace.com/2017/04/should-you-buy-united-continental-holdings-inc-ual-stock-pros-cons/.

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