Wheels Up gets a Buy rating from Jefferies

Jefferies reinstates Wheels Up coverage by increasing estimated revenue based on strong demand and prepaid membership blocks

Wheels Up’s lagging stock price received a boost earlier this week when Jefferies reinstated coverage with a Buy rating.

Jefferies set a price target of $8 per share, down from its previous target of $10.

The private aviation provider closed today at $3.28.

Across six other analysts covering UP, recommendations are split between Buy and Hold.

Price targets range from $5 to $8.50.

Jefferies said its base case envisions 10% revenue growth in 2023 following 19% growth this year.

It also expects operating leverage and easing supply constraints will help cut losses.

Wheels Up has said that on-fleet capacity has been limited by a pilot shortage.

Since November, it has hired 200 pilots. According to Jefferies, half of the new pilots began producing revenue in late Q1. By March, the rest of the 150 hired will begin making revenue in Q2.

The acquisition of charter operator Alante in February added another 40 pilots. The just closed purchase of Air Partner will add profitable revenue.

Jefferies also pointed to strong prepaid block sales as a signal of future demand and loyalty.

Wheels Up will announce its Q1 financial results on May 12.

Last November, Wheels Up launched a refreshed 2022 membership program enabling existing members to lock in rates for multiple years.

New members were subject to longer callouts and higher prices. However, the company countered an industry trend by not adding peak days.

Wheels Up members who deposit $100,000 or $200,000 have just 20 peak days. Those who buy $400,000 blocks of flight time have 10 peak days.

An analysis of over 250 jet card and membership programs by Private Jet Card Comparisons found the average number of annual peak days increased from 22.8 days prior to the Covid pandemic to 49.1 days currently.

A February survey of Private Jet Card Comparisons subscribers found that 47% of respondents who are considering changing programs cited “too many peak days or blackout days.”