Deutsche Bank upgrades Frontier, JetBlue to Buy on improving backdrop

Investing.com -- Deutsche Bank upgraded Frontier Group and JetBlue Airways to Buy from Hold in a note Thursday, saying the outlook for airline stocks has improved markedly over the past month.

“We are upgrading our ratings on Frontier (ULCC) and JetBlue (JBLU) from Hold to Buy based on our view that the near-term backdrop for airline shares has improved markedly over the past month,” analyst Michael Linenberg wrote.

The bank cited three main reasons. First, it sees a favorable supply backdrop extending into next year, meaning airlines are not adding too many seats.

Second, carriers are prioritizing higher fares to offset rising costs such as fuel, which Deutsche Bank believes particularly benefits airlines that serve value-conscious leisure travelers.

Third, both Frontier and JetBlue are close to several major product launches that should meaningfully boost revenue and margins in 2027 and beyond.

Linenberg added that if the U.S. election results lead to a cooling of geopolitical tensions and less volatile fuel prices, airlines with the most operating and financial leverage, such as Frontier and JetBlue, would benefit disproportionately.

The bank also pointed to seasonal trends that tend to favor the sector at this time of year.

“Another consideration is that the airline sector tends to be a good place to be invested in the December quarter (i.e., the “seasonal trade”), with the sector having produced positive returns in 21 out of the last 25 years,” Linenberg said.

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