Add Virgin America (VA) to Your Portfolio: Here's Why - Analyst Blog
California-based low-cost airline Virgin America VA had commenced trading in Nov 2014. The company, partly owned by British billionaire investor Richard Branson, had made an impressive debut on Nasdaq raising $307 million through the offering. This Zacks Rank #2 (Buy) stock has been using the proceeds primarily for general corporate purposes.
Virgin America performed exceedingly well in the final quarter of 2014, results of which were revealed last month. The carrier reported better-than-expected earnings and revenues in the quarter. The carrier projects year-over-year capacity increase in the range of 2% to 3% in the first quarter of 2015 (read more: Virgin America Rises on Q4 Earnings, Revenue Beat).
Estimates on the Upswing
We note that earnings estimates for Virgin America are exhibiting a healthy uptrend following the strong fourth quarter results. Over the last 30 days, the 2015 Zacks Consensus Estimate of earnings has gone up 10 cents to $4.44 per share on the back of upward revisions by 2 analysts. Likewise, the Zacks Consensus Estimate for 2016 has jumped 37 cents over the last month to $4.52 per share. The long-term expected earnings per share growth rate is pegged at a healthy 8.93%.
Expansion Efforts in Place
Virgin America is leaving no stone unturned to expand its operations and boost its top line further. To that end, the carrier announced last month that it will introduce flights from Dallas Love Field to Austin-Bergstrom International Airport in Austin, TX, effective Apr 28, 2015. We are also impressed by the disciplined cost structure at Virgin America. Moreover, the carrier’s practice of flying a single aircraft type (Airbus A320 family), high asset utilization and outsourcing of activities like baggage delivery, heavy maintenance and reservations are also encouraging.
In view of the above positives, we believe there is significant scope for stock price appreciation at Virgin America in the near term.
Other Stocks to Consider
Apart from Virgin America, investors interested in the airlines industry may also consider stocks like Spirit Airlines, Inc. SAVE, JetBlue Airways JBLU and Hawaiian Holdings Inc. HA. All the three stocks carry a Zacks Rank #1 (Strong Buy).
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VIRGIN AMERICA (VA): Free Stock Analysis Report
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