IBD 50 growth stock Copa Holdings is going sideways, but its tight price action is actually bullish.
The stock formed a four-weeks-tight pattern with a buy point of 114.48, according to IBD MarketSmith pattern recognition. Copa also is finding support at its 10-week moving average — another positive aspect for the chart.
Airline stocks have rallied amid surging summer travel demand. The growth stock has a perfect Composite Rating of 99, the highest of 19 companies in the airline industry group.
The airline's sales growth over the past seven quarters has been cooling off from a triple-digit pace. Earnings growth over the same period shows sustained recovery from previous quarters, when the company lost money.
In the first quarter, sales grew 52% to $867.3 million while earnings per share of $3.99 were up an impressive 470%. The company beat FactSet's earnings estimates of $3.07 per share and sales views of $828.2 million.
Passenger revenue grew 29.5% from the same quarter in 2019, prior to the pandemic lockdowns that affected all air travel. Cargo and mail revenue, though a much smaller portion of total revenue, showed even stronger growth at 69%.
A dividends of 82 cents per share was paid on June 15 to shareholders on record as of May 31.
Analysts polled by FactSet see earnings of $3.17 per share in the second quarter, which would be an 891% increase, on sales of $780.7 million, up 13%. Copa has consistently beaten estimates over the past six quarters.
Growth Stock Has 40% Upside
Shares broke out of a cup-without-handle base after earnings came out on May 11.
The stock fell in the strongest volume since the current base started forming on June 23. That was related to the annual rebalancing of the Russell indexes, so it's not necessarily a blemish on the stock.
On July 3, analysts at Raymond James raised their price target to 155 from 138 while maintaining a strong buy rating. The new price target suggests a 40% upside for the growth stock.
Copa is a Panama-based airline that operates flights under two subsidiaries: Copa Airlines and Copa Columbia. It also offers a low-cost carrier service called Wingo.
The company runs 295 scheduled flights daily to 76 destinations across 32 countries in North, Central and South America and the Caribbean. It also has a code-sharing partnership with United Airlines.
The company has big plans to modernize its fleet through the acquisition of 66 Boeing 737 MAX due for delivery through 2028.
Mutual funds own 70% of shares outstanding. More funds have been buying Copa shares in the past four quarters, helping the growth stock to an Accumulation/Distribution Rating of B-.
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