UAL Nosedives Despite Sweetening Employee Buyout Offer

Global Seaport just initiated coverage on UAL

Assistant Editor
Jun 17, 2020 at 10:08 AM
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Just a few weeks removed from its plan to eliminate 13 officer positions, United Airlines Holdings Inc (NASDAQ:UAL) is making headlines once again after Reuters said the flight concern beefed up its voluntary buyout offer for flight attendants. UAL announced that, despite thousands of employees volunteering for the first buyout offer, the number was "not enough." The new deal, which had its deadline extended through July  8, guarantees flight attendants a $1,500 health credit for every year worked, up to $45,000. At last check, United Airlines stock was off 2.4% to trade at $39.19.

Meanwhile, Seaport Global initiated coverage with a "buy" rating and target price of $56. Other analysts don't seem to share the sentiment, as just three of the 11 in coverage call it a "strong buy." However, the 12-month consensus price target of $38.64 is a slim 3.1% discount to current levels, leaving plenty of room for more upgrades and/or price-target hikes in the near future.

United Airlines stock fell to a nearly eight-year low in March, and sank back to similar levels in May. In the time since, however, the equity has tacked on nearly 125%, and now sports a quarterly gain of 24%.

In stark contrast with the last time we covered United Airlines stock, shorts are heading for the door. In the last reporting period, short interest fell 24.7%, and the 26.94 million shares sold short now represent an eyebrow-raising 10.5% of the stock's available float.  

The good news for those options traders is that the stock’s Schaeffer’s Volatility Index (SVI) of 121% sits in the 35th percentile of all other readings from the past year. This means options players are pricing in relatively low volatility expectations at the moment.


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