Please ensure Javascript is enabled for purposes of website accessibility

Why Mesa Air Group Stock Is Up Today

By Lou Whiteman - Feb 17, 2021 at 4:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The regional airline gets a big vote of confidence from one Wall Street analyst.

What happened

Shares of Mesa Air Group (MESA 4.06%) climbed more than 10% on Wednesday afternoon after the regional airline operator got a double upgrade from a Wall Street analyst. The company is weathering the pandemic well, and its recent earnings report appears to be making believers out of many on Wall Street.

So what

Airline stocks endured a miserable 2020 due to the pandemic, but Mesa is not a typical airline. The company operates small planes under contracts with larger partners. In Mesa's case, that means it flies primarily for American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), and Deutsche Post (OTC: DPSGY) DHL. The fee-for-service model has helped insulate Mesa from some of the losses its larger partners have faced during the pandemic. Mesa last week surprised investors with a fiscal first-quarter profit that exceeded expectations, causing the stock to gain altitude.

View through the window at an airport lounge.

Image source: Getty Images.

Bank of America analyst Andrew Didora apparently liked what he saw from the company's report. On Wednesday, the analyst raised the stock to a buy rating from underperform and assigned a $15 price target to the shares, up from his previous $2 target.

Didora said Mesa is a "large beneficiary" of government support for the airline industry, and Mesa's long-term contracts with United and American position it well for a rebound.

Now what

Even with today's gains, Mesa still trades below $12, so there remains upside to Didora's price target. But Mesa has gained a lot in a short amount of time, up 200% in the last six months.

Its business model should do well in a recovery, but note that a recovery is expected to take time. Larger airlines have warned it could take until the second half of this decade before traffic fully recovers to pre-pandemic levels.

This is a solid company to hold on to through the recovery, but investors should be warned we are unlikely to see another 200% gain in the six months to come.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Mesa Air Group, Inc. Stock Quote
Mesa Air Group, Inc.
$2.82 (4.06%) $0.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.