Balanced Hold Rating for Southwest Airlines Amid Strategic Revenue Initiatives and Economic Challenges

UBS analyst Thomas Wadewitz upgraded the rating on Southwest Airlines (LUV – Research Report) to a Hold yesterday, setting a price target of $36.00.

Thomas Wadewitz’s rating is based on a combination of factors that reflect both potential opportunities and risks for Southwest Airlines. The airline’s recent strategic changes, such as introducing checked bag fees and a basic economy class, are expected to boost revenue significantly. These initiatives demonstrate a proactive approach to enhancing financial performance despite a challenging market environment.
However, Wadewitz also notes that the current weaker economic cycle could limit the upside potential for Southwest’s earnings per share and stock price. While the revenue and cost-cutting measures are promising, the ongoing demand softness in the airline industry poses a risk. Consequently, the Hold rating reflects a balanced view of the potential for financial improvement against the backdrop of a cautious consumer market.

In another report released on March 17, Bernstein also reiterated a Hold rating on the stock with a $33.00 price target.

LUV’s price has also changed moderately for the past six months – from $28.940 to $33.600, which is a 16.10% increase.