Southwest Airlines (LUV – Research Report), the Industrials sector company, was revisited by a Wall Street analyst today. Analyst David Vernon from Bernstein maintained a Hold rating on the stock and has a $32.00 price target.
Geoff Meacham has given his Hold rating due to a combination of factors including the recent developments within the domestic airline market which have been more positive than initially expected. Despite previous concerns about a maturing domestic market and high operational costs impacting 2024 earnings, recent industry shifts have led to a reassessment of the situation. The unforeseen rejection of the JetBlue-Spirit deal, operational equipment issues at Spirit Airlines, and a strategic pivot by Frontier Airlines to move capacity away from competitive markets, coupled with slower deliveries of Boeing Max aircraft, have all contributed to a more favorable capacity outlook.
Moreover, the resilience of travel demand has surpassed predictions, leading to a belief that unit revenue forecasts may be too conservative and could drive upward revisions. These factors, combined with a moderation of capacity growth expectations, have tempered the previously bearish outlook for Southwest Airlines. As a result, Bernstein has updated their financial model, increasing their earnings estimates for 2024 and 2025 closer to the consensus, and adjusting the target price upward. Despite this, the firm maintains a degree of caution, recognizing that while the market may not be as concerned with Southwest’s ability to return to pre-Covid profit levels in the near term, the current elevated valuation exposes the stock to potential shifts in market sentiment.
In another report released on February 8, TD Cowen also maintained a Hold rating on the stock with a $26.00 price target.
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Southwest Airlines (LUV) Company Description:
Southwest Airlines Co. is a passenger airline which provides scheduled air transportation in the United States and near-international markets. As of Dec. 31, 2020, the air carrier operated a total fleet of 718 Boeing 737 aircrafts and covered 107 destinations.
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