Credit Suisse Boards These 2 Airline Stocks

The brokerage firm named ALK its top pick in the sector

Managing Editor
Nov 19, 2018 at 10:16 AM
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This morning, Credit Suisse initiated coverage on airline stocks United Continental Holdings Inc (NASDAQ:UAL) and Alaska Air Group, Inc. (NYSE:ALK), doling out "overweight" ratings on both, as well as price targets of $113 and $81, respectively. The analyst in coverage also named the latter its top pick among U.S. airlines.

At last check, UAL was up 0.5% to trade at $92.71 in response. United stock flew to a record high of $93.60 on Nov. 9, and boasts a 38% lead in 2018. While the shares did pull back in October amid the broad market sell-off, they found a supportive trendline in their 100-day moving average. What's more, the security is heading into the historically bullish Thanksgiving week.

Despite the bull note today, there is still room aboard the bandwagon. Of the 15 brokerages covering UAL, six still rate it a tepid "hold." And while the stock has outperformed on the charts, shorts have been piling on. Short interest increased by 39% in the most recent reporting period to 15.45 million shares, the most since late February. 

Looking at Alaska Air Group, the stock is up 0.9% to trade at $68.28. ALK could be heading for another meet-up with the $70 level, an area that rejected the shares back in September. Nevertheless, the equity, fresh off a bull note from Goldman Sachs, just turned in its third straight weekly win and boasts a 17% lead in the last six months. 

In the options pits, puts are rising in popularity. ALK's 10-day put/call volume ratio of 0.87 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is in the 81st percentile of its annual range. This indicates that while purchased ALK calls have outnumbered puts on an absolute basis, speculators have shown a healthier-than-usual appetite for bearish bets during the past two weeks.

Echoing this, the equity's Schaeffer's put/call open interest ratio (SOIR) stands at 0.93, which also arrives in the 90th percentile of its annual range. In other words, speculators are less call-skewed than normal among options set to expire within three months. 

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