SPECIAL REPORT The Top 7 Stocks for 2024

Ticking Time Bombs: 3 Airline Stocks to Dump Before the Damage Is Done


  • Clearing the runway. Identifying the airline stocks to sell amidst challenges.
  • Southwest Airlines (LUV): A tarnished reputation from mass cancellations, a 16.7% YTD stock dip and gloomy sales forecasts reveal potential operational challenges.
  • Allegiant Travel (ALGT): Amid rising operational costs and the shadows of the 737 MAX debacle, Allegiant’s future becomes clouded, as reflected in its consensus Hold rating.
  • JetBlue Airways (JBLU): Hindered merger plans with Spirit, coupled with profitability struggles and looming fare hikes, amplify concerns surrounding JetBlue’s direction.
airline stocks to sell - Ticking Time Bombs: 3 Airline Stocks to Dump Before the Damage Is Done

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The skies haven’t exactly been clear for the aviation world. Casting our gaze back, we recall the catastrophic impact of the pandemic, a time when the sector came to an abrupt halt, and carriers had to grapple with long spells of contracted operations. The daunting financial turbulence of 2020 set the airline industry back by billions. While the ascent out of this abyss has been equally challenging for all players, certain carriers have felt the strain more acutely. The unpredictable tango of fuel prices, pilot union troubles and an impending economic slowdown likely to curb travel enthusiasm in the upcoming months has made airline stocks to sell incredibly relevant. That said, let’s look at three airline stocks to sell this September, lest they nosedive.

Southwest Airlines (LUV)

Southwest airplane

Once heralded as a paragon of operational excellence, Southwest Airlines (NYSE:LUV) has seen its shimmering reputation take a massive hit. The airline’s unexpected flurry of flight cancellations last December and April didn’t just inconvenience travelers but raised red flags over its management’s acumen. Moreover, its stock has nosedived more than 18% year-to-date (YTD), making it seem like a featherweight beside aviation behemoths.

Furthermore, it was incredibly disappointing for shareholders looking for a silver lining in its second-quarter results. The reported earnings of $1.09 fell 16% year-over-year, prompting a correction in its stock price. With Southwest adjusting its forecast to an even gloomier outlook, predicting a third-quarter sales drop of between 5% and 7%, one can’t help but wonder if it’s a temporary setback or a revealing insight into deeper operational woes.

Allegiant Travel (ALGT)

Source: Shutterstock

Once a beacon for leisure travelers from America’s smaller cities, Allegiant Travel (NASDAQ:ALGT) is currently caught in a web of macroeconomic uncertainties. The escalating labor expenses and the nebulous macroeconomic environment have shadowed its prospects for the latter part of the year. Though positive EPS revisions hint at an upward trajectory, the airline seems to be in for a rough time ahead.

Resonating with challenges like those of American Airlines (NASDAQ:AAL), Allegiant faces the juxtaposition of revenue gains to pre-pandemic levels amidst rising inflationary operational costs. The aftermath of the 737 MAX debacle further muddies the waters. Given these headwinds, it’s hardly surprising that Tipranks analysts struck a cautious chord, rendering a consensus Hold rating on the stock. As the skies ahead look rather uncertain, Allegiant’s ability to navigate them remains to be seen.

JetBlue Airways (JBLU)

Source: Shutterstock

JetBlue Airways (NASDAQ:JBLU) was once deemed a top player in the air travel sphere, poised to reshape the sector effectively, but recent developments have cast a shadow on its potential. The airline’s ambitious plans to merge with Spirit Airlines (NYSE:SAVE) are left hanging in the balance, facing significant regulatory roadblocks. That prolonged uncertainty has exacerbated JBLU stock concerns, especially as the airline grapples with managing its profitability amidst a highly competitive landscape.

The clouds of doubt grow denser with revelations of internal documents hinting at JetBlue’s intention to significantly hike fares on Spirit flights, raising eyebrows in an already inflation-pressured economy. The sector’s weakening outlook continues to intensify the pressure on JetBlue, leaving stakeholders in sweats. Hence, it’s difficult to see the airliner navigating through in its current predicament and is likely to falter in the upcoming quarters. Moreover, it’s trading at more than 53 times earnings; the stock is trading at a remarkably steep valuation.

On the date of publication, Muslim Farooque did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Article printed from InvestorPlace Media, https://investorplace.com/2023/09/ticking-time-bombs-3-airline-stocks-to-dump-before-the-damage-is-done/.

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