On Wednesday, United Airlines Holdings Inc. (NASDAQ:UAL) shares edged slightly lower after reporting its most recent quarterly results. The company announced its fiscal third-quarter revenue and earnings before markets opened, beating the consensus Street expectations.
The company posted fiscal Q3 non-GAAP earnings per share of -$1.02, beating the average for Street expectations of -$1.68. In addition, its GAAP EPS of $1.44 outperformed the average estimate of -$1.37, while revenue for the quarter skyrocketed by over 211% Y/Y to $7.75 billion, $110 million ahead of the average for analyst forecasts.
However, despite the summer driven growth, UAL’s Q3 capacity remained below pre-covid levels at 28%, pushing total operating revenue nearly 32% off the 2019 levels.
Is UAL undervalued?
From an investment perspective, United Airlines shares trade at an exciting forward P/E ratio of 15.94, making the stock a compelling option for value investors.
However, analysts forecast its earnings per share to plummet by more than 318% this year before recovering by 133.3% next year. Therefore, although the stock looks potentially undervalued, its projected earnings decline could be playing a part in the valuation.
As a result, it may be best to monitor the performance before betting on the recovery.
Source – TradingView
Technically, United Airlines shares appear to have recently pulled back to complete a downward breakout from an ascending channel formation. As a result, the stock has dropped below the 100-day moving average creating an opportunity for a rebound.
However, with shares far from reaching oversold conditions, the current decline could continue. Therefore, investors could target extended declines at about $42.68, or lower at $39.44, while $48.96 and $52.17 are the support levels.
Not safe to buy yet?
In summary, United Airlines shares seem to have recently plummeted to break out of an ascending channel formation. However, the stock is yet to reach the oversold conditions of the 14-day RSI.
Therefore, given the company’s expected earnings decline this year, it may be best to wait before betting on next year’s rebound.
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