Wheels Up stock price on edge ahead of earnings: buy the dip?

Wheels Up Experience (UP) stock price crashed to a record low of $1 on Monday as investors waited for its quarterly financial results. The UP share price has crashed by 35% this year, lagging behind other companies in Wall Street. This drop has brought its market cap to about $746 million. So, will the UP stock crash after forming a descending triangle ahead of earnings?

Wheels Up Experience background

Wheels Up Experience is a company that seeks to disrupt the corporate travel industry. It does that by having a fleet of private jets that customers can book easily.

Customers can choose to be members and pay an annual fee. An individual membership starts at $100,000, while an SME package starts at $250,000. The custom enterprise solutions business starts at $500,000 annually. 

The company also offers charter services, where customers don’t need to pay these membership packages. Instead, they can use the pay-as-you-go model where they pay the current rates for their flights. 

Wheels Up Experience operates in a highly competitive industry. NetJets, which Warren Buffett backs, is the biggest player in the private jet industry. The other top players in the sector are firms like Flexjet, VistaJet, FlyExclusive, and BlackJet. 

Read more: Wheels Up stock price forecast: Hopes lost, crash landing ahead

Wheels Up, which Delta Air Lines and Cox Enterprises back, has struggled in the past few years and is now going through a turnaround strategy. It has come close to bankruptcy in the past few years.

As part of its turnaround strategy, the company decided to sell its aircraft management business to Airshare. It also sold some of its Citation X aircraft. The remaining company is a leaner organization, which the management hopes will be more profitable in the future. 

Wheels Up has also announced a fleet modernization plan that it will see it replace its current fleet with Embraer Phenom 300 and Bombardier Challenger 300 series. 

Further, the company announced that it would acquire GrandView Aviation’s fleet of Phenom 300 planes. 

UP earnings ahead

The next key catalyst for Wheels Up’s stock price will be its earnings, which will provide more color on its business performance. 

The most recent results showed that the company’s business was stabilizing. Its active members dropped by 38% to 6,699 during the quarter, a move that it attributed to the changes in its business strategy. Active users dropped to 8,215. 

Wheel’s Up revenue crashed by 39% to $193 million, while its net loss improved by 60% to over $57 million. 

The nine-month revenue dropped by 42% to $587 million, while the net loss narrowed to $252 million. These declines were because the company exited the aircraft management and aircraft sale business. 

Analysts are mixed about the future of Wheels Up. Optimists argue that the firm’s business will continue doing well as the turnaround approach continues. They also point to the modest improvement of its balance sheet after it secured a $332 million revolving credit from Bank of America. 

Wheels Up stock price analysis

UP stock chart by TradingView

The daily chart shows that the UP stock price has been in a strong downtrend in the past few months. It has dropped below the key support level at $1.15, the lowest swing on November 13. 

The stock has moved below the 50-day and 25-day moving averages. Also, the Percentage Price Oscillator (PPO) and the Relative Strength Index (RSI) have continued falling. 

The UP share price has also formed a descending triangle pattern, a popular bearish outlook. Therefore, the stock will likely continue falling and move below $1 because of the triangle pattern. 

Conversely, a move above the 100-day moving average at $1.72 will invalidate the bearish outlook. However, there is also a likelihood that the stock may have a short squeeze after earnings. 

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