Southwest Airlines shares could recover from recent descent: Barron’s
12 June, 2018, 9:35 am
NEW YORK (Reuters) – Southwest Airlines Co
The shares began their descent in January and the decline continued after a passenger died when an engine broke apart during a flight in April.
Fewer people are now booking on the Dallas-based carrier, a slowdown Southwest said stemmed mainly from its own reduction in advertising after the tragedy, the first U.S. airline death since 2009, Barron’s said.
Rising fuel prices and planned expansion by some rivals that could mean more competition have stoked fears about the sector, helping sending Southwest stock down 24 percent this year, the paper reported.
But some analysts think Southwest’s strong business model merits a price-earnings ratio in the mid-teens, compared with the current 11.3 times 2018 earnings estimates, Barron’s said.
The paper said Cowen & Co analyst Helane Becker sees a price-earnings multiple of 15, which implies a 25 percent rise in the stock to $63 from its close of $50.48 on Friday.
United Continental Holdings Inc
Southwest also stands to benefit from U.S. corporate tax cuts, Barron’s said. Analysts on average expect its earnings per share to rise 25 percent this year and 18 percent in 2019, Barron’s said.