Goldman Sachs upgrades Continental Airlines, Southwest Airlines Co Lowered Target

Goldman Sachs upgraded shares of Continental Airlines Inc. on Monday and raised price targets on several other airline stocks, but lowered its target for Southwest Airlines Co. Airline stocks were mixed Monday, held back by a rise in oil prices.

But the months-long slide in oil prices, which are now about one-third their record levels of early July, has helped airline stocks. Goldman forecast 2009 prices of $45 per barrel for crude oil, which traded Monday just below $49 on the New York Mercantile Exchange.

Citing the surprisingly deep drop in oil prices, Goldman raised its rating on Houston-based Continental to “buy” from “neutral,” and boosted its six-month price target for the shares to $24 from $17.

Analyst Christopher Cuomo said Continental could save $3 billion this year compared with 2008 due to lower fuel prices. The airline will benefit because it was less aggressive than rivals in hedging against rising oil prices, he said.

Cuomo said the fuel savings would offset a “bleak” revenue outlook, with a sales decline that will rival the downturn in 2001, including the months after the terror attacks in New York and Washington. He also said Continental has ample liquidity and the shares are undervalued.

The analyst also cited falling oil prices in raising targets on others without changing their ratings, including the nation’s largest carrier, “buy”-rated Delta Air Lines Inc., to $13 from $10.