United Airlines Stock Looks Ripe for Bear Notes

The Federal Aviation Administration (FAA) will initiate a formal evaluation of United Airlines

In a move that feels like a long time coming, the Federal Aviation Administration’s (FAA) announced today it will initiate a formal evaluation of United Airlines Holdings Inc (NASDAQ:UAL) to determine whether or not it is complying with safety regulations. This follows a string of incidents, including an aircraft that was missing an external panel upon landing, a plane that rolled onto the grass, and another that lost a tire after takeoff. 

UAL is down 3.9% to trade at $44.51 out of the gate this morning, poised to erase its monthly gain of 2%. Nevertheless, the shares remain up 9% so far this year, and surged to their highest level since September in the previous session.

Analysts remain optimistic, with 15 of the 19 in coverage sporting a “buy” or better rating, while the 12-month consensus target price of $64.78 is a 43.2% premium to current levels. In other words, the security looks ripe for a round of downgrades and/or price-target cuts.

Short-term options traders, meanwhile, lean overwhelmingly bearish. This is per the stock’s Schaeffer’s open interest ratio (SOIR) of 1.91 that sits in the 99th percentile of its 12-month range.

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