United Airlines Holdings (UAL) Could Be 8% Undervalued As New Colombia Flights Begin
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United Airlines Holdings (UAL) is expanding its Latin America footprint by announcing new year round nonstop flights from Houston and Washington, D.C., to Cartagena, Colombia, starting December 17, subject to government approval.
See our latest analysis for United Airlines Holdings.
Recent trading has been choppy for United Airlines Holdings, with the share price falling 1.6% over the last day and 6.6% over the past week. However, the stock is still showing a 19.8% 30 day share price return and a 57.4% 1 year total shareholder return, as longer term interest in the stock has remained solid.
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After such a strong 1 year run and a recent pullback, the question for United Airlines Holdings now is whether most of the easy gains are already in the rear view mirror or if the current valuation still leaves meaningful upside ahead.
Most Popular Narrative: 7.6% Undervalued
Based on the most followed narrative, United Airlines Holdings is priced below an estimated fair value of $136.63, compared with the recent close at $126.22, which puts more focus on the assumptions behind that gap.
Execution of the United Next fleet modernization and capacity expansion strategy, particularly upgauging to larger, more fuel efficient aircraft with more premium seats, will unlock further operational leverage, reduce per seat operating costs, and drive operating margin improvement over the next several years.
Curious what sits behind that fair value call? The narrative leans heavily on measured revenue growth, stable margins and a future earnings multiple that is anything but conservative.
Result: Fair Value of $136.63 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, the United Airlines Holdings narrative still faces pressure from higher financial leverage and the risk that changing travel patterns could weaken demand for premium seats.
Find out about the key risks to this United Airlines Holdings narrative.
Another View: United Airlines Holdings Through A Cash Flow Lens
While the most popular narrative sees United Airlines Holdings trading about 7.6% below an estimated fair value of $136.63, the SWS DCF model paints a tougher picture, with a future cash flow value of $94.42 compared with the current $126.22 share price. So which story do you trust when cash flows and narratives disagree?