Mon, Mar 07, 2005
But A Lot Of Brokers Say Now's The Time
If you play the stock
market, chances are you have a more-than-passing interest in
aviation stocks. Chances are equally as good that you've watched
with dismay the sell off in airline stocks -- some of which are
down as much as 25-percent this year alone (it's only March).
Blame rising fuel costs, blame Delta's reorganization and the
new level of competition it's created in the industry. But ever
since 9/11, airline stocks have taken a beating.
That may be about to end.
The Wall Street Journal says more and more investors think the
market has overreacted to these developments and, as a result,
airline stocks are now undervalued. Some even suggest that jumping
on the airline bandwagon now could bring returns as high as
30-percent over the next year.
"We think the recent sell off has created a buying opportunity
for some of the names, especially airlines that could benefit from
catalysts outside of lower fuel prices and/or further contraction
of US Airways," said Merrill Lynch analyst Mike Linenberg in a
recent research report quoted by the WSJ.
For example, Linenberg thinks America West stock will hit $7.00
a share over the next ten months... a 39% increase over Friday's
closing value. Merrill Lynch has upgraded AmWest, Continental, and
AirTran Holdings from "neutral" to "buy."
But the marketplace hasn't been kind to airline investors over
the past 20 years and a lot of potential stock buyers could be
skittish as a result. Still, consider the case of AMR -- American
Airlines' parent company. It was on the brink of Chapter 11
bankruptcy just two years ago, its stock price down to $1.41 in
March 2003. Just three months later, after making cost-cutting
deals with its unions and losing CEO Don Carty, the airline's stock
was worth $11.32 a share, according to the Journal.
FMI: AMEX Airline Stock Index
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