JPMorgan said the recovery in air travel is well on its way and will continue to improve. In the meantime, airlines are good names for investors to trade. The Wall Street firm upgraded shares of Southwest Airlines to overweight from neutral on Friday, sending shares up nearly 2% in premarket trading. JPMorgan also hiked its 12-month price target on the airline to $70 per share, implying a rally of more than 30% in the next year. "We believe the current rally has further to go, and we recommend trade-oriented accounts take up short-term residence in airline stocks," JPMorgan airline analyst Jamie Baker told clients. Southwest has clawed its way back from the coronavirus induced sell-off in 2020. While the stock is up about 10% this year, the airline industry is still recovering to its pre-pandemic levels. JPMorgan does not believe the airline sector is as long-term investible as it did pre-COVID-19 and said for the time being, airline stocks are best-considered trading stocks. "Spend has accelerated, RTO plans seem to be holding steady, COVID-19 data is largely pointed in the right direction, and US borders are set to open (with caveats) in time to rescue the all-important 4Q holidays," Baker added. For Southwest specifically, JPMorgan said it estimates 2023 revenue up 1.5% on capacity up 1.7%, with a healthy 2% decline in fuel costs. "Given the lower cost of fuel ($2.00 estimate vs. 2019's $2.08 actual), these slight changes drive a 4 point expansion in operating margin and result in $4.68 of earnings (relative to the $4.79 consensus, with a range of $4.00 to $6.40)," said Baker. JPMorgan also upgraded Frontier Group Holdings to overweight from neutral on Friday and downgraded Spirit Airlines to neutral from overweight. The firm has buy ratings on Alaska Air , Delta and JetBlue . — with reporting from CNBC's Michael Bloom.
JPMorgan said the recovery in air travel is well on its way and will continue to improve. In the meantime, airlines are good names for investors to trade.