Investors who have owned stocks in the past year have generally experienced some big gains. In fact, the SPDR S&P 500 SPY total return over the past 12 months is 36.3%. But there is no question some big-name stocks performed better than others along the way.
Southwest’s Big Run: One company that has been a decent investment in the past year has been airline giant Southwest Airlines Co LUV.
Southwest and other travel stocks experienced a near worst-case scenario when the COVID-19 breakout occurred in early 2020.
Travel demand fell to nearly 0% during the worst of the pandemic. However, the latest summer travel data suggests the airline industry is experiencing a healthy rebound this year as vaccine rollouts continue worldwide.
In fact, in July Southwest guided for third-quarter revenue that’s just 14% below 2019 pre-pandemic levels. Southwest’s balance sheet is also relatively healthy given it reported $3.6 billion in net cash.
In 2019, Southwest generated $4.27 in EPS on $22.4 billion in revenue.
In 2020, those numbers plummeted to a $5.44 EPS loss on just $9 billion in revenue. Southwest’s long-term debt also ballooned from $1.3 billion in 2019 to $9.6 billion in 2020.
At the beginning of 2020, Southwest shares were trading at around $54. By the beginning of March, the stock had dropped to around $47 after news of the virus spreading in China prompted concerns about a U.S. pandemic. On March 27, airlines received $25 billion in federal bailouts. On May 6, Southwest shares dropped below $25. The stock ultimately bottomed at $22.47 on May 14.
Airlines got another $15 billion in government bailouts in December. By that time, vaccine optimism had boosted Southwest’s share price back up to above $46.
Southwest In 2021, Beyond: In mid-April 2021, Southwest shares hit a new multi-year high of $64.75 before pulling back to $50.18. Much of the recent concerns that have weighed on airline stocks have concerned the potential negative impact of the Delta variant of COVID-19 on economic reopening and travel demand recovery.
Southwest Airlines investors who bought one year ago and held on have generated a nice return on their investment. In fact, $1,000 in Southwest stock bought on August 2, 2020, would be worth about $1,635 today.
Looking ahead, analysts are expecting Southwest's stock to gain altitude once again in the next 12 months. The average price target among the 19 analysts covering the stock is $66, suggesting a 31.6% upside from current levels.
Photo: Courtesy Southwest Airlines
Read also: BEST AIRLINE STOCKS RIGHT NOW
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