Airline stocks soared on Friday, an unexpected development that even prompted President Trump to express optimism in the beleaguered industry.
Here's why it happened, and here's why it could continue.
It actually started late Thursday, as shares of American Airlines Group surged a record 41 percent to $16.72 after the carrier announced an upgraded summer flight schedule in which it plans to rebuild domestic capacity to 55 percent of 2019 levels and international flights to 20 percent, according to Barrons.
The publication noted that the stock continued to soar Friday, gaining more than 21 percent while Spirit Airlines jumped 20 percent and United Airlines Holdings was up more than 18 percent.
But Barrons also pointed out that many analysts aren't ready to jump on board. Citi's Stephen Trent reiterated his Sell rating, writing in an investor's note on Thursday that "the lack of business travel puts some downside risk on price point, while ambitious load factor targets (percentage of seats filled vs. total number of seats) could create social distancing concerns."
Rising load factors are good, just not while it's still early on here during the coronavirus pandemic which might raise concerns among passengers about social distancing.
"These factors, along with the scale of American's net leverage and pension liabilities relative to expected Ebitda generation, underpin our Sell rating on the shares," Trent writes, referring to earnings before interest, taxes, depreciation, and amortization. Trent has a $9 price target on the stock.
But CNBC believes the stock surge could continue this coming week. The network said the New York Stock Exchange Arca Airline Index was up nearly 50 percent last week, and that "airline stocks are headed for their biggest weekly gains ever on hopes for a rebound in the U.S. economy and air travel demand."
The combination of airlines increasing its summer flying capacity along with the majority of states in the U.S. starting to lift its lockdown and shelter-in-place restrictions should help the stock continue to rise.
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