Stock Analysis & Ideas

Wheels Up: Private Jet Company is Flying High

Vaccination campaigns in the United States picked up pace in the spring, but COVID-related anxieties aren’t going away anytime soon. As a result, many people still find traveling to be a hassle.

Given the health and safety fears on commercial flights, the trend of using private aircraft has already emerged. While the cost may be a deterrent for many, charter aircraft is a great mode of transportation in these trying times.

Wheels Up (UP) is one such private aviation company. It has been attempting to bring a greater segment of the public to the skies at a reasonable cost. (See UP Dividend Date and History on TipRanks)

Reporting on this orientation is Sheila Kahyaoglu of Jefferies, who wrote that the company aims to “democratize biz jet travel” by offering competitive pricing to make private flights more accessible to a wider audience. Wheels Up, she believes, is in a strong position to acquire a larger share of the rising private aviation industry, thanks to “lower entry barriers.”

Furthermore, the four-star analyst was impressed by the enormous revenue and margin growth prospects that Wheels Up has ahead of it.

Kahyaoglu finds the flight membership fee, which starts at $3K, quite appealing, and believes that such an affordable price is sure to drive up flight revenues, going forward. Above this, Wheels Up is forward-thinking, using technology to improve its “asset utilization and jet availability.” The analyst remarked that the company’s high level of web traffic indicates increasing demand for its services.

Coming to the company’s margins, the analyst predicts that both gross and EBITDA margins will rise in the coming days. At the same time, expenses are expected to decline, driven by leveraging of general and administrative expenses and “improved marketing efficiency.”

Additionally, the analyst finds the company’s cash profile attractive, with no debt outstanding at the end of Q1 and free cash flow generation predicted to be positive for 2021.

As a result, the analyst gives the stock a Buy rating and a price target of $13, implying a potential 12-month upside of 73.1%.  On TipRanks, UP has an analyst rating consensus of Moderate Buy, based on 2 Buys and 1 Hold rating. The average UP price target is $15.00, reflecting a potential 12-month upside of 99.7%.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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