Southwest To Retain Its Position Of Strength, Says This Analyst

Raymond James analyst Savanthi Syth lowered the price target for Southwest Airlines Co LUV to $51 (an upside of 34%) from $55 while maintaining the Strong Buy rating on the shares post its Q2 results.
The analyst believes Southwest sees the same trends as the rest of the industry; thus, the disappointing RASM guide is likely a function of the policy change on vouchers and a more conservative outlook.
Related: Southwest Airlines Shares Slip Post Q2 Results, Foresees Lower Capacity in FY22, Slashes Boeing Aircraft Deliveries Estimates By 42%
Syth mentions that 2H capacity/costs didn’t disappoint, in contrast to most U.S. airlines; however, she believes there could be a risk in late 2023 due to Boeing Co BA delivery delays.
The analyst expects Southwest to retain its position of strength, including a best-in-class balance sheet and cost benefit from a very attractively priced fleet order, and even improve as current initiatives enable it to capture a greater share of corporate revenue (vs. 2019), including through up-sell.
Additionally, the analyst sees Southwest as a medium-term benefactor of a potential JetBlue Airways Corp JBLU-Spirit Airlines, Inc. SAVE merger, given outsized network exposure to a combined entity distracted by integration.
Related: Spirit Airlines Locks The Deal With JetBlue, Creating National Low-Fare Challenger
Price Action: LUV shares are trading lower by 0.05% at $38.13 on the last check Friday.
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