Citi analyst Stephen Trent downgraded Southwest (LUV) to Sell from Neutral with a price target of $29.50, down from $31.50. Southwest’s earnings quality and free cash flow conversion look weaker than they did before the pandemic, the analyst tells investors in a research note. The firm says that as U.S. network airlines enjoy positive earnings quality and free cash flow trajectories, other carriers “have overtaken Southwest on these fronts.” However, Southwest now trades at a bigger price-to-earnings premium to the group than it did pre-COVID, contends Citi. Over time, the firm sees Southwest’s valuation correcting to more normalized levels, as the network carriers’ premium travel gains, limit Southwest’s efforts to penetrate that category.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 55% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Published first on TheFly – the ultimate source for real-time, market-moving breaking financial news. Try Now>>
Read More on LUV:
- Archer Aviation’s (ACHR) Recent Turbulence Could Present a Buying Opportunity
- DOT sues Southwest Airlines for chronic delays, takes action against Frontier
- U.S. Government Sues Southwest Airlines (LUV) over “Chronically Delayed Flights”
- Southwest Airlines (NYSE:LUV) Implements Bold Cost-Cutting Measures to Drive Margins
- Lilly cuts FY24 outlook, United Rentals to acquire H&E: Morning Buzz