It’s time to buy shares of United Airlines , which could soar more than 50% next year, according to Morgan Stanley. Analyst Ravi Shanker upgraded shares of United Airlines to overweight from equal weight, saying that 2023 could be a “goldilocks” year for the airline. “After three years of uncertainty when the market was either too cold or too hot, 2023 could be the year when conditions are ‘just right,’ potentially delivering earnings well above market expectations,” Shanker wrote in a Monday note. Airline travel cratered in 2020 and 2021 because of the Covid-19 pandemic. This year, the industry experienced a surge due to pent-up demand, leading to sharp price increases. Next year, the analyst expects that conditions will continue to normalize and reach a sweet spot. Leisure demand will remain strong, while corporate travel is expected to return to and exceed prepandemic levels in early 2023, according to the analyst. International travel is also expected to recover by mid-2023. Meanwhile, pricing is expected to cool from their highs this year as capacity returns. Jet fuel prices are expected to remain little changed from this year, though they could be volatile. All this means that the risk-reward for airlines is attractive, even in the face of continued recessionary concerns. “As the trajectory of earnings becomes clearer, ‘black swans’ are laid to rest, and cash return resumes at the names with the highest quality balance sheets, we believe investors will return to the space and valuations should normalize as earnings do,” Shankar wrote. Shares of United Airlines are up slightly in 2022. The analyst’s $67 price target implies roughly 52% upside from here. The stock was up more than 1% in Monday premarket trading. —CNBC’s Michael Bloom contributed to this report.
