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Has United Airlines Stock Hit Bottom? Analysts Say, More Pain Ahead

united airlines

United Airlines (NYSE: UAL) stock is among the biggest losers as the coronavirus outbreak continues to sap demand for travel across the Asia Pacific and other parts of the world. The company has been cutting both domestic and international flights from its schedule over the past month; the United Airlines recently announced plans to cut international flights by 20% and domestic flights by 10% in March.

The negative impact is not limited to United Airlines. The stock prices of travel and airline companies have been already in a downswing due to tourism restrictions in China and Europe. The cancellation of corporate conferences and business events are adding to the bearish trend.

Airlines could lose around $63B to $113B in passenger revenue this year, according to the International Air Transport Association.

Has United Airlines Stock...

United Airlines stock plunged by 30 per cent in the last month alone, extending the three months price decline to 42 per cent.

United Airlines recently announced they are withdrawing fiscal 2020 guidance, blaming heightened uncertainty due to the coronavirus outbreak. The company says they don’t know about the duration of coronavirus and its impact on overall demand.

The company expects to generate earnings in the range of $11-$13 a share if the virus impact reduces by mid-May and normal travel patterns start for Pacific routes. Despite headwinds, the United Airlines 8-K form indicates a sustainable growth forecast for the following years.

United Airlines is exposed to coronavirus spread as it generates 40 per cent of revenue from international flights compared to 30 per cent for Delta (NYSE: DAL) and 3 per cent for Southwest (NYSE: LUV).

Cowen analyst Helane Becker suggested investors stay away from airline stocks in the short-term.

“Our near term concern is that airlines start canceling flights on the North Atlantic and in the US domestic market. We believe those would be extreme measures, but we also note that a number of companies are limiting corporate travel. That is worrisome, as the large international airlines are dependent on corporate travel,” notes analyst Helane Becker.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.