BofA Securities analysts changed the rating for United Continental (NASDAQ:UAL) from Underperform to Buy, adjusting the price target from $40.00 to $56.00. The analysts highlighted that this upgrade is a notable shift from the previous cautious stance due to concerns over high valuation, substantial capital expenditure, and leverage issues.
The current assessment shows a valuation discrepancy compared to United Continental’s effective execution and an unexpectedly favorable leverage outlook. Although there are persistent industry risks and capital expenditures remain above historical norms, United Continental has outperformed in revenue generation relative to its industry counterparts. The company is also projected to sustain a leverage ratio of around 2.5x throughout this capital expenditure cycle. Presently, it trades at about 4.5 times the estimated EBITDAR for 2024, positioning it towards the lower end of its historical valuation spectrum.