Not all airline stocks are created equal in the currently topsy-turvy market environment.
Renewed volatility in the airline sector should be considered the short-term new normal as traders assess the risk from the new Omicron variant. But there are a few names in the troubled space to consider as longer term buys if one is able to stomach the near-term wild up-and-down swings.
Long-time airline sector analyst Helane Becker of Cowen said in a note to clients on Tuesday she continues to have Buy ratings on: United Airlines, Allegiant, Alaska Air, Frontier Airlines, JetBlue, Southwest Airlines, Spirit Airlines and Volaris.
Explained Becker, "We believe people will want to continue to travel, so although we may see a dip in bookings the first few days after Thanksgiving, we believe we will start to see an increase in bookings again. In the past year, each new variant has brought a decline in bookings, but then an increase once the surge dissipates. We expect the same pattern to emerge, although we don't expect each successive dip to be shorter than the prior one as people begin to accept that we will have to learn to live with this indefinitely."
To be sure, it will take that aforementioned strong stomach to hold onto the airlines at the moment as re-opening stocks are dumped aggressively across the board.
The Dow Jones Industrial Average tanked more than 600 points in afternoon trading Tuesday, while the Nasdaq Composite and S&P 500 were also deeply in the red. All 30 Dow components were in the red for the session, except for Apple.
The Arca Airline Index — which tracks the stock price performances of major airlines such as Delta Air Lines and JetBlue — is now down close to 10% over the past five trading sessions.
Selling pressure is being seen throughout the major airline carriers. Delta and JetBlue shares are down 7.5% and 9%, respectively in the last five sessions. United Airlines is down 12%.
Becker concedes the demand picture for airlines will be mixed in coming weeks due to the Omicron variant, which explains why the stocks are acting so weak currently.
"We expect a dip in travel for the first two weeks of December, and then an increase from about mid-December through January 3, 2022. We are likely to see another dip before increasing again in mid-February, with that increase likely back to 2019 levels. We expect to see year-over-year growth in 2022, especially in international travel next summer," Becker adds.