The coronavirus from China continues to spread globally. And despite the World Health Organization refusing to name the bug a pandemic, it’s growing clear that’s exactly what’s on our hands. Wall Street is trying to be in a good mood about all this, but industries like cruise line airline stocks are feeling the effects.
This is comes as number of deaths in the United States grows, and after the Bank of Japan (BOJ) supported markets with nearly a $1 billion purchase of Japanese equities and nearly $5 billion worth of bonds over the weekend.
Such action is in keeping with the theme of this bull market: Something does bump, and the monetary policy stimulus pours in. But this time feels different. Just hours after the BOJ’s actions, the negative headlines continued with first infections reported in New York City, Moscow and elsewhere.
As a result, while the major U.S. averages have clawed into positive territory thanks to — you guessed it — large-cap technology stocks, key areas like transportation continue to be in the tank. Airline stocks, in particular, are getting hit hard on worries over a crash in global and domestic travel.
That said, here are three to companies that you should sell your position in now.
Airline Stocks to Sell: United Airlines (UAL)
United (NASDAQ:UAL) shares are down another 6% Monday, down more than a third from their recent multi-month trading range. This fall violates their late 2017 lows to return to levels not seen since late 2016.
The latest headlines are that a number of airlines, including United, are suspending flights to Milan. This comes on top of already suspended or cancelled flights to Asia in response to the outbreak.
Furthermore, United CEO Oscar Munoz told employees recently in an email that the company would likely need to cut additional flights due to a drop in demand. And before this, competitor JetBlue (NASDAQ:JBLU) suspended change and cancellation fees between Feb. 27 and March 11 as travelers look to reschedule or cancel trips.
Also, Buckingham Research analyst Daniel McKenzie recently downgraded his rating on UAL to “neutral” from “buy”, and lowered his price target from to $61 from $105. So, collectively, United Airlines is looking like one of the airline stocks to sell.
American Airlines (AAL)
American Airlines (NASDAQ:AAL) shares are continuing their hard and fast drop, down 11 of the past 12 trading sessions since peaking in the middle of February. Shares have lost nearly 40% of their value over that time, falling below their 2013 IPO lows.
Yeah, that’s right. AAL shares have never been this cheap. And they are likely to get cheaper, with Deutsche Bank analyst Michael Linenberg recently downgrading a number of airline stocks — including AAL — in a recent note to clients. Furthermore, Buckingham Research analyst Daniel McKenzie recently downgraded his rating on AAL to “neutral” from “buy” along with a price target of $20 — dropping it from $42.
Currently, the airline has issued a number of different travel waivers — and broader service cuts are likely as the virus spreads further. That said, AAL is another one of the airline stocks to sell at this point.
Delta Airlines (DAL)
Delta (NYSE:DAL) shares are down roughly 22% from their recent double-top high near $62, as the largest and highest-rated airline is also unable to escape the fallout from the coronavirus.
Maybe the CEO Ed Bastian, who was ridiculed for saying it’s “proper” to ask to recline your airline seat and that he never reclines, can do something soon to turn things around. He will have a chance soon, as representatives from the major airlines and cruise line operators will meet at the White House later this week.
Shares could be a bargain once the coronavirus is brought under control, with the price-to-earnings multiple down to 6.5 times with a 3.5% dividend yield. However, that could be awhile. And with Boeing (NYSE:BA) still looking to get the 737 MAX back into the air, competitors like Southwest (NYSE:LUV) will enjoy a return of grounded capacity — something that will put downward pressure on ticket prices.
That said, DAL is the third name here that is looking like one of the airline stocks to sell right now.
As of this writing, William Roth did not hold any of the aforementioned securities.