Red-Hot Airline Stock Could Enjoy Seasonal Tailwinds

ALK has been among the best stocks to own in December, historically

by Andrea Kramer

Published on Nov 28, 2018 at 10:26 AM

While the S&P 500 Index (SPX) is on pace for a second straight monthly loss, the airline sector has been flying above broad-market headwinds. In fact, Alaska Air Group, Inc. (NYSE:ALK) stock has added more than 20% so far in November, and is pacing for its best month since October 2014. What's more, ALK shares could extend their uptrend into December, if recent history is any indicator.

Specifically, ALK has been one of the best stocks to own in the month of December, looking back 10 years. The airline issue has ended the month higher 90% of the time, with an average gain of 6.58%, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

Today, Alaska Air stock is up 4.3% to trade at $73.79, set for its highest close since January. The security has been on fire since its October lows below $60, likely with help from lower oil prices. In addition, the company -- like sector peer Spirit Airlines (SAVE) -- yesterday upwardly revised its fourth-quarter unit revenue guidance. As such, ALK surged past a former round-number hurdle at $70, which contained rebound attempts earlier this year.

ALK stock chart nov 28

With Alaska Air flexing some fundamental and technical muscle, Goldman Sachs upgraded the stock today, adding it to the "Conviction Buy" list. In addition, Morgan Stanley, Credit Suisse, and Cowen all raised their price targets on ALK, to $78, $83, and $84, respectively. More upbeat analyst attention could be in store, too. Currently, five of 12 analysts maintain tepid "hold" or "strong sell" ratings.

A short squeeze could also add fuel to the stock's fire. Short interest accounts for a healthy 8.3% of ALK's total available float. At the equity's average pace of trading, it would take six sessions to buy back these bearish bets.

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