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Analysts Have a Mixed View on Southwest Airlines

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May. 22 2019, Published 9:40 a.m. ET

Mixed opinion

Analysts have differing views about Southwest Airlines (LUV) stock. However, the consensus recommendation on the stock remains a “buy” according to analysts polled by Reuters. Moreover, their target price on the stock doesn’t depict much upside potential compared with other US airlines.

About 50% of the analysts polled by Reuters have provided a bullish rating on the airline. Of the 21 analysts covering Southwest Airlines, six have provided a “strong buy” recommendation, five gave given it a “buy” recommendation, nine say to “hold” it, and the remaining one analyst provided a “sell” rating. Their average target price of $59.29 on the stock reflects a return of 11.1% over the next year.

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On the contrary, analysts appear to be bullish on the entire airline industry. They have provided a “buy” recommendation for the majority of Southwest Airlines’ peers. The one-year target prices for American Airlines (AAL), United Airlines (UAL), and Delta Air Lines (DAL) signify potential upsides of 30.3%, 26.1%, and 21.1%, respectively, from their current prices.

Stock performance

Southwest Airlines is one among very few airline stocks that have registered a double-digit gain in its stock price. The stock has returned 14.8% YTD and has outperformed the gains of the Dow Jones and the S&P 500, which are up 10.9% and 14.3%, respectively.

Southwest Airlines stock has also outperformed the iShares Transportation Average ETF (IYT), which has gained 14.7%. The ETF invests in US transportation stocks listed on the Dow Jones and has allocated 16.7% of its portfolio to the passenger airline industry.

Southwest Airlines stock’s YTD gain is also the highest among its peers. The largest US air carrier, Delta Air Lines (DAL), has returned 9.9% this year so far. On the other hand, United Airlines (UAL) and American Airlines (AAL) have lost 1% and 2.5%, respectively, of their respective market capitalization YTD.

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