Airline stocks hit their highest levels in almost 14 years, bolstered by a gain of more than 6 percent for United Continental Holdings Inc. after JPMorgan Chase & Co. raised earnings estimates for the carriers and said their shares are undervalued.
The Bloomberg U.S. Airlines Index rose as much as 3.5 percent, reaching its highest intraday level since February 2001. The index was up 2.7 percent at 11:13 a.m. in New York. United led the group with an increase of as much as 6.5 percent to $63.15, the airline’s highest level since emerging from bankruptcy in 2006.
The gains came after JPMorgan Chase analyst Jamie Baker revised his price targets for six U.S. airlines, including raising his United target to $95.50 from $74.50. He also gave a bump to American Airlines Group Inc., increasing his target for the Fort Worth, Texas-based carrier to $80.50 from $64.50.
In his research note, Baker said investors haven’t boosted airline stocks commensurately with the “precipitous” decline in fuel prices. Domestic fares are higher and trans-Atlantic capacity hasn’t risen as much as had been expected, he wrote.
Some investors are nervous that the profits they’re projecting for airlines, driven by plummeting fuel, are so large they can’t be right, he said.
“We suffer from no such reticence and suggest there’s no better alternative than to go where the numbers take you,” Baker wrote. “And that’s what we’ve done.”
American climbed as much as 4.2 percent to $50.27, its highest since merging with US Airways Group a year ago. JetBlue Airways Corp. rose as much as 5.3 percent to its highest price since January 2007. Delta Air Lines Inc. increased 3.2 percent to $46.17, and Southwest Airlines Co. gained 0.9 percent to $41.41.
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