By many measures 2017 was a decent year for airline investors, but heading into 2018 one name sticks out as best in class: Southwest Airlines Co LUV.
The Analyst
Atlantic Equities' Lindsay Bettiol upgraded Southwest Airlines' stock from Neutral to Overweight with a price target boosted from $68 to $83.
The Thesis
Southwest should be considered as the best-in-class U.S. based airliner and boasts multiple structural benefits versus its legacy peers, the analyst said. These include:
- A mature P2P (point-to-point) which allows the company to be the largest carrier at 25 of the top 50 airports in the U.S.;
- A cost advantage profile that is significant versus its peers;
- A strong domestic focus;
- An element of counter-cyclicality embedded within its business model;
- A strong operational performance which creates a strong brand loyalty; and
- A 44-year streak of uninterrupted profitability.
Aside from the multiple structural benefits, the company plans on taking action to improve multiple financial metrics, including winding back on capital spending, improving margins, and the ability to return any cash windfall to investors, among others.
Price Action
Shares of Southwest Airlines hit a new 52-week high of $64.70 Thursday and was higher by nearly 2 percent.
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