The 3 Most Undervalued Airline Stocks to Buy in May 2024


  • With Jerome Powell suggesting stagflation fears are overstated now might be an excellent time to consider exposure to these undervalued airline stocks.
  • Delta Air Lines (DAL): Robust demand and efficient capacity management despite rising operational costs make it a top buy.
  • United Airlines Holdings (UAL): With its innovative approach and improved financial health the stock is a steal at only 0.30 times forward sales.
  • Copa Holdings (CPA): With superb market-beating free cash flow margins and strong positioning in the growing Latin American aviation market, the stock’s an excellent investment.
Undervalued Airline Stocks - The 3 Most Undervalued Airline Stocks to Buy in May 2024

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It may seem counterintuitive to invest in undervalued airline stocks now. The recent economic reports have stoked fears the U.S. may be heading toward a crippling stagflation scenario. Inflation remains sticky, while the recent GDP data indicates a substantial economic slowdown.

However, Mr. Market’s biggest nemesis in Federal Reserve Chair Jerome Powell feels we’re probably getting ahead of ourselves in the stagflation debate. He feels the current economic scenario is significantly less severe than the 1970s version of stagflation. Moreover, Mr.Powell indicated that the central bank’s rate hike is unlikely. With that in mind, here are three undervalued airline stocks to buy on the dip.

Undervalued Airline Stocks: Delta Air Lines (DAL)

a Delta (DAL) plane flying through the clouds
Source: NextNewMedia /

Delta Air Lines (NYSE:DAL) exemplifies excellence in execution within the travel space. It posted flawless earning prints last year, with the stock jumping more than 55%. Moreover, DAL stock has bucked broader market trends, delivering double-digit gains this past month. It still has room to run, though, with consensus estimates pointing to at least a 10% upside from current levels.

Delta’s healthy positioning is mainly linked to its tremendous execution in a relatively complicated operational and cost environment.  In the first quarter (Q1), the airliner reported sales of $13.75 billion, blowing past analyst projections by over $953 million. Moreover, its passenger revenues jumped 7%, in line with the increase in capacity.

Hence, without exerting pressure on its customers, it mostly achieved its sales growth mostly through capacity increases. Also, the 2% increase in its load factor suggests that the airliner added capacity and did so efficiently.

Furthermore, it effectively maintained double-digit EBITDA margins despite the cost headwinds. Higher costs will likely impact its margins in the upcoming quarter, but demand remains remarkably robust.

United Airlines Holdings (UAL)

a United (UAL) airplane flying through the sky
Source: NextNewMedia /

United Airlines Holdings (NASDAQ:UAL) is another leading U.S. legacy airliner that’s proven to be a symbol of innovation. Over the past few years, it has shifted from a growth-centric approach to prioritizing financial health and efficiency. With a more refined business model, UAL has focused on profitable long-haul routes while optimizing operations in its mid-continent hubs.

Consequently, we’ve seen a substantial improvement in its historical bottom-line margins and a stellar increase in its cash till. From 2019 to its latest report, its cash and short investment balance has risen by 183% to roughly $14 billion. Moreover, it has effectively cut its financial leverage over the past few years, although it remains challenging.

Furthermore, we’ve seen UAL dabbling with AI to refine its operations further. It is leveraging AI for pilot support, automated communications, and operational management. Bullish on AI, Jason Birnbaum, United’s Chief Information Officer (CIO), said, “I think the travel industry has so many different examples of where AI can be used both for the customer and for the employees.”

Despite all the positives, UAL stock trades at just 0.30 times forward sales estimates, 80% behind the sector median.

Copa Holdings (CPA)

Copa plane mid-flight backdropped by white clouds. CPA stock
Source: Carlos Yudica/

Copa Holdings (NYSE:CPA) exudes quality, a lot more so than its peers. The Panamanian airline leads the pack in terms of profitability, with market-beating results over the past few years. What’s most telling is its lofty free cash flow margin, which is a mighty 15%, trouncing the sector median by 222%. Additionally, its return on common equity is 29%, comfortably beating the 12.35% sector median.

Latin America is the third most populated region globally and will continue to form a significant portion of the global aviation market. In fact, according to IATA, load factors in Latin America increased by 2.1% to 84.7%, the highest for any region last year.

Copa’s passenger traffic has effectively recovered from the pandemic, as shown by its incredible top-line growth. Moreover, the future for Latin American air travel remains robust, positioning it as an excellent stock to buy at current prices. Yielding almost 5%, TipRanks analysts expect a whopping 57% upside from current prices.

On the date of publication, Muslim Farooque did not have (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 Publishing Guidelines.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.

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