Markets
Market analysts tell everyone to avoid airlines stocks right now
We have already heard how airlines have been hit hard due to the Coronavirus pandemic and situation leading to it all over the world. It is also no surprise that airlines companies have been posting record losses because they really don’t have any traffic right now but they still need to incur some costs. If we look at this crisis in the aviation industry from an investor’s view, it could be enticing to think that the airline stocks are at their lowest price right now so some people would take the risk and buy them for profits later on.
This is the classic case of making profits in the long term while everyone knows that their situation right now is not at all good. However, market analysts have now said that investors should stay away from airline stocks completely. This is because while the situation is not good right now, there are very less chances they will see an uptick anytime soon. Also, it is believed that many airlines will crumble this year meaning that their money could be gone as well.
As per trader Todd Gordon’s advice, investors should “avoid the airlines”. Now, before you say that this was obvious looking at the revenues posted by airlines then we would like to tell you that many are hoping for United Airlines’ second-quarter earnings reports and Todd Gordon advised this before they have even posted them. Gordon added that “We’re generally avoiding the space,” and the reason he cites is that we currently have “terrible economics,” “high fixed costs” and “very little pricing power.”
Referring to Delta Airlines, he adds that “We think Delta’s best in class, but we do expect bankruptcies across the industry from Covid,” and also mentions that pre-Covid profits were not great but “stay-at-home” environment will lead to more problems forward.
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