Southwest (NYSE:LUV) hasn’t been having the best run of things lately. The airline faces brisk competition for a market that’s doing great but is showing some signs of faltering as the YOLO (You Only Live Once) lifestyle comes under reality’s withering fire. But Southwest is up modestly in Monday afternoon’s trading thanks largely to a board pick that’s giving investors confidence.
Former CEO of US Airways, Rakesh Gangwal, will now be part of Southwest’s board of directors. Gangwal was brought on board as a way to head off accusations from Elliott Management, who noted that Southwest board members have been around for quite some time. Worse, they’re “insular,” which is a nice way to say “out of touch.”
With Elliott now holding 11% of Southwest, it’s certainly worth paying attention to, and Southwest is doing just that. Gangwal also started IndiGo, which is currently the largest airline in Asia. This should blunt any criticism about a board that’s been around forever and acts like it accordingly.
That’s Great, But What About the Airline?
Obviously, fending off activist challenges is important, but there are much bigger fish to fry here. The recent challenges seen at Boeing (NYSE:BA) are starting to spill over into Southwest, but Southwest is taking great care to demonstrate that customer safety is a major priority.
This is a vital point, as analysts are starting to get concerned about Southwest. Top-rated analyst John Staszak from Argus Research recently offered up a report that suggests Southwest may have a longer road to recovery than expected. Staszak’s report notes that “employee costs (are) high” and “aircraft deliveries (are) delayed,” two points that don’t sit well with any airline or its investors.
Is Southwest a Buy Right Now?
Turning to Wall Street, analysts have a Hold consensus rating on LUV stock based on four Buys, 10 Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 27.4% loss in its share price over the past year, the average LUV price target of $27.85 per share implies 2.69% upside potential.
