United Airlines stock had a great year, surging by over 140%, beating benchmark indices like the S&P 500 and Dow Jones. UAL also did better than popular technology companies like Microsoft, Amazon, and Alphabet.
United Airlines did much better than other airline groups like Delta, American Airlines, Southwest, and JetBlue. So, why did the UAL stock price surge in 2024, and will the rally gain steam this year?
Profitability growth continued
United Airlines stock price surged in 2024 mostly because of the ongoing recovery of the civil aviation industry, focus on profitability, and its capital returns to investors.
The management has worked hard and continued to boost its profit margins in the past few years as it aims to move in par with Delta Air Lines, the gold standard in the industry.
Its revenue has continued growing in the past few years, and analysts expect the trend to continue. It generated over $15 billion in annual revenue in 2020 as the pandemic forced it to stop flying.
The revenue growth then continued in 2021, when it made $24 billion. Its trailing twelve-month (TTM) revenue stood at $60 billion.
Analysts are upbeat about United Airlines’s business. The average revenue estimate for 2024 is $56.65 billion, up from $54 billion a year earlier. It will then cross the $60 billion in the next financial year.
United Airlines’ profits are also growing. In the trailing twelve months, they went from a net loss of $1.6 billion in 2021 to a net profit of $2.7 billion.
This growth has helped the company return funds to its shareholders. In the last quarter, it announced a $1.5 billion share repurchase program, a move that is expected to reduce its share count and boost its earnings per share.
The management hopes to continue growing its business, especially its international segment, which the management to double.
Read more: Here’s why United Airlines stock is beating American, IAG, Delta
Potential risks remain
Still, United Airlines stock face numerous risks ahead. The first one is that competition, especially on its international route, is expected to be stiff in the next few years as more airlines intensify their volume. This stiff competition may affect its volume and pricing.
Second, airlines tend to be highly cyclical businesses, which experience boom and bust cycles. The past few years have been boom periods, meaning that a bust may happen either in 2025 or later.
Third, the stock has become fairly overvalued after more than quadrupling in the past few years. As such, there is a risk that it will go through a valuation reset when it gets to the average analyst estimate of $110.
United Airlines stock has double topped
The other risk to the UAL share price is that it is seeing signs of double-topping at $104. A double top is one of the most popular bearish chart patterns in the market. In this case, the neckline is at $90.13.
The stock also remains above the 50-day and 100-day moving averages. That is a sign that it will have a mean reversion situation soon. A mean reversion is when a stock retreats and falls back to the average prices over time. In this case, a mean reversion to the 100 day moving average would see it drop to around $80.
On the flip side, more United Airlines stock surge will be confirmed if it rises and moves above the double-top level at $104.
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