Deutsche Bank Initiates UAL (UAUA) Coverage

Deutsche Bank Securities analysts Michael Linenberg and Richa Talwar initiated coverage of the airline UAL Corporation (Nasdaq: UAUA) with a Buy rating and a price target of $33 per share.

Linenberg and Talwar said that because UAL Corporation (UAUA) derives so much revenue from some of the business segments that were hurt most by the global recession (long-haul international flights, business/premium travel and cargo), the company is in a good position to benefit from an economic recovery.

The Deutsche Bank Securities analysts wrote, "Since announcing the agreement to merge with CAL in May, UAL Corporation’s shares have been moving closely with Continental’s share price reflecting the nature of the stock-for-stock transaction (1.05 UAUA for 1 CAL share owned). We think there is a high probability that the deal is approved. While a merger with CAL would add execution risk to the UAUA investment thesis (the goal is to close the transaction by year end 2010), the fact is that the combined market value of equity is still about 40% less than Delta’s current market value of equity. And that’s in spite of the fact that the combined CAL/UAUA would have a slightly larger revenue base and a similar capital structure (on a debt/capitalization basis)."

Shares of UAL (UAUA) were up nearly 3% at $23.42 per share during the morning session.

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