Market Overview

Southwest Airlines Has 21% Upside Potential, Argus Says In Upgrade

Share:
Southwest Airlines Has 21% Upside Potential, Argus Says In Upgrade

Southwest Airlines Co (NYSE: LUV) reported forecast-beating second-quarter results July 26, and an Argus analyst said Friday that the airline's fortunes will only improve from here. 

The Analyst

Analyst John Staszak upgraded Southwest Airlines from Hold to Buy and set a price target of $73, suggesting 21-percent upside from current levels when the company's dividend is taken into consideration. 

The Thesis

Southwest Airlines is likely to benefit from the recent improvement in domestic airline fares and the prospects for stronger revenue per available seat mile, a measure of profitability, Staszak said in the upgrade note. (See his track record here.)

The analyst projects that Q3 RASM will reach the top end of the company's guidance range of down 1 percent to up 1 percent, with the metric accelerating to 2.5-percent growth in Q4 due to carefully managed capacity and a new reservation system.

Revenue should get a shot in the arm from "the sale of boarding slots, improvement in the frequent-flier program, a new reservation system and a new credit card agreement with Chase," Staszak said. 

Argus expects above-peer average revenue growth in the long run on the basis of Southwest's "simple fare structure and reputation for generally good customer service," the analyst said. 

Argus raised its EPS estimate for 2018 from $4.50 to $4.52 and for 2019 from $5.10 to $5.15, citing accelerating revenue growth and positive earnings surprises over the past five years.

The Price Action

Southwest Airlines shares have lost about 6 percent year-to-date. The stock was up 1.7 percent at $62.07 at the time of publication Friday.

Related Links:

Mesa Air Group: 5 Reasons Why Imperial Capital Is Bullish On The Regional Airline

Airline Stock Roundup: A4A's Labor Day Forecast, Delta's Route Changes And More

Latest Ratings for LUV

DateFirmActionFromTo
Oct 2020Credit SuisseMaintainsOutperform
Oct 2020Morgan StanleyMaintainsOverweight
Oct 2020Raymond JamesMaintainsStrong Buy

View More Analyst Ratings for LUV
View the Latest Analyst Ratings

 

Related Articles (LUV)

View Comments and Join the Discussion!

Posted-In: Argus John StaszakAnalyst Color Upgrades Price Target Travel Analyst Ratings General Best of Benzinga

Latest Ratings

StockFirmActionPT
FBJP MorganMaintains315.0
AMDCitigroupMaintains13.0
RPTXNorthland Capital MarketsInitiates Coverage On
PCSACraig-HallumInitiates Coverage On12.0
ENPHCraig-HallumDowngrades105.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com