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Is Southwest Airlines Stock a Buy Right Now? This Is What You Need to Know
Stock Analysis & Ideas

Is Southwest Airlines Stock a Buy Right Now? This Is What You Need to Know

If the pandemic wasn’t enough of a disruptive force, Southwest Airlines (LUV) seems intent on sabotaging its own recovery.

On Monday, the airline canceled another 350 flights and delayed 1,240 following a weekend of widespread cancellations and delays, during which the carrier nixed over 2,000 flights.

The company said bad weather and air traffic control issues were to blame, but the pilots union accused the company of mishandling its response, claiming the issues were a “minor temporary event,” and would have been dealt with in a more assured manner by other airlines. Some of Southwest’s peers suffered disruptions too, but not to the same extent.

The latest mishap follows setbacks experienced throughout the summer as storms and labor shortages affected operations. The event also closely follows Friday’s action, when the Southwest Airlines Pilots Association requested a federal court to block the airline’s order that all employees get vaccinated. The union has argued that should pilots react negatively to the vaccine, it could result in sick leave or disability, and therefore, Southwest must negotiate over the issue.

While Raymond James’ Savanthi Syth believes the financial implications won’t be too significant, the latest events will do little to restore confidence amongst an already embattled workforce.

“Due to the operational mishap at Southwest happening during an off-peak period (albeit, slightly stronger demand due to the Columbus Day weekend), we expect a limited financial impact and no forward demand implications,” the analyst said. “However, Southwest already made tactical capacity cuts in late August for 4Q21 schedules in an effort to address operational reliability, so this recent setback likely adds to the related unit cost pressure and may exacerbate strained labor union relations.”

To this end, Syth rates LUV shares an Outperform (i.e. Buy) along with a $68 price target. Shares could appreciate ~30%, should the analyst’s thesis play out in the coming months. (To watch Syth’s track record, click here)

And what about the rest of the Street? Barring one skeptic, all 15 other recent reviews are positive, making for a Strong Buy consensus rating. The average price target sits just under Syth’s; at $66.38, the figure is set to generate returns of 27% over the one-year timeframe. (See LUV stock analysis on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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