Why US Airways Has Room to Fly

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of US Airways (UNKNOWN: LCC.DL  ) flew 3% this morning after Deutsche Bank upgraded the airline operator from hold to buy.

So what: Along with the upgrade, analyst Michael Linenberg boosted his price target to $30 (from $21), representing 40% worth of upside to yesterday's close. While value investors might be turned off by the stock's big run in 2013, Linenberg believes there's plenty of sky to fly given just how much the company is improving.

Now what: Deutsche thinks the stock's risk and reward trade-off is too juicy to pass up. "We are raising our rating on US Airways's shares from Hold to Buy based on an improved fundamental outlook that, in our opinion, transcends the potential uncertainty surrounding the company's proposed merger with American which has been blocked by the DOJ," noted Deutsche. "The improvement observed in the Sep Q (e.g. pre-tax margin expanded 4 points to 9.5%) combined with material revisions to our 2013 and 2014 EPS estimates underlie a revised 12 month price target of $30." Of course, when you couple the airline industry's notoriously intense nature with the stock's already high altitude -- now up 90% over its 52-week lows -- US Airways as a long-term holding seems far less appealing. 

More compelling industrial picks
With the U.S. relying on the rest of the world for such a large percentage of our goods, many investors are ready for the end of the "made in China" era. Well, it may be here. Read all about the biggest industry disrupters since the personal computer in "3 Stocks to Own for the New Industrial Revolution". Just click here to learn more.

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Related Tickers

12/31/1969 7:00 PM
LCC.DL $0.00 Down +0.00 +0.00%
US Airways Group CAPS Rating: *