These two U.S. airline stocks are buys and can surge around 30% each, UBS says

UBS upgraded Delta and United airlines to 'buy' from 'neutral,' citing tariff relief from agreements with China and the UK and a more stable economic backdrop. Analyst Thomas Wadewitz set price targets of $66 for Delta and $105 for United, implying upsides of 30% and 35% respectively, driven by increased confidence in international and premium revenue resilience. The upgrade also reflects a more positive demand outlook and stronger TRASM (total revenue per available seat mile), leading to increased EPS estimates for both airlines.

Analysis

UBS has upgraded both Delta Air Lines (DAL) and United Airlines (UAL) to 'buy' from 'neutral', signaling a more bullish stance on the airline giants. Analyst Thomas Wadewitz increased Delta's price target to $66 per share, up from $46, implying roughly 30% upside, and United's target to $105 per share, up from $67, suggesting a 35% upside potential from their respective Friday closing prices. The primary drivers for this upgrade include recent tariff relief from agreements with China and the UK, which support a revised base case economic outlook shifting from a potential downturn to expectations of stability or slow growth. This macroeconomic shift bolsters confidence in the resilience of international and premium revenue, which had been a key cyclical concern. Furthermore, positive comments from Delta executives contribute to an expectation of greater demand stability, potentially benefiting the entire sector. The improved demand outlook is anticipated to lead to stronger total revenue per available seat mile (TRASM), which is the core reason for increased earnings per share (EPS) estimates for both airlines. UBS's models now assume TRASM to be approximately 1 percentage point better in 2025 than previously modeled, with an additional 0.5 percentage point stronger growth in 2026E off the higher 2025E base for both DAL and UAL. Despite this optimistic revision, Delta stock has reportedly slipped 16% in 2025, and United has pulled back about 20% in the same period. The broader analyst community remains largely bullish, with LSEG data showing 18 out of 23 analysts covering Delta rating it a buy or strong buy, and 20 out of 23 analysts holding a buy or strong buy rating for United.

Key Decisions for Investors

• Investors should take note of UBS's upgraded 'buy' ratings for Delta and United, underpinned by expectations of a more stable economic environment and resilient international and premium travel demand.
• The revised price targets, suggesting potential upsides of approximately 30% for Delta and 35% for United, combined with their reported year-to-date stock declines in 2025 of 16% and 20% respectively, may indicate attractive entry points.
• Consider monitoring ongoing developments in international trade relations, sustained demand for premium air travel, and the airlines' progress towards achieving the forecasted improvements in TRASM and EPS as key validation points for the revised outlook.