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Is It Time For Investors To Board Southwest Airlines?

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Is It Time For Investors To Board Southwest Airlines?

Suggesting it might be time for investors to board Southwest Airlines Co (NYSE: LUV), Argus upgraded the shares of the company. The firm predicated its view on the company continuing to develop strategies that deliver growth.

Commendable Growth Strategies

Analyst David Coleman noted the management's attempt at lowering non-fuel operating costs and generating additional sources of revenue. The company also expanded its service and recently implemented a $500 million reservation system, the analyst added. The improved system, according to the company, would augment its earnings by $500 million in 2020.

Argus also pointed to the company's clean balance sheet and its impressive record of returning capital to shareholders through dividends and buybacks (check out Coleman's track record).

Premium Valuation Justified

While noting that Southwest shares have been outperforming the broader market and the transportation industry over the past one-to-five years, the firm said the shares still inadequately reflect the company's current outlook.

"The shares are priced slightly higher than the peer group, but we think the premium is deserved given high levels of profitability and market performance," Argus said.

As such, Argus upgraded shares of Southwest Airlines from Hold to Buy, with a price target of $68. The firm clarified that its price target implies 13 percent potential upside from current levels, including the dividend.

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Latest Ratings for LUV

DateFirmActionFromTo
Sep 2020Morgan StanleyInitiates Coverage OnOverweight
Sep 2020BerenbergUpgradesHoldBuy
Jul 2020Raymond JamesMaintainsStrong Buy

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