Pick Southwest Airlines Stock For Quick Gains?

SALT LAKE CITY, UTAH—(BUSINESS WIRE)—(BUSINESS WIRE)—(BUSINESS WIRE)—(BUSINESS WIRE)—(BUSINESS W At Salt Lake City International Airport in Utah, the Southwest Airlines logo is on the wall behind the… [+] ticketing agents. (Photo courtesy of Getty Images/Robert Alexander)
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[Updated on July 15, 2021]
In a recent press release, the Centers for Disease Control and Prevention (CDC) emphasized the efficacy of immunizations even against the rapidly spreading Delta strain. However, airline stocks have been in a downward trend as a result of fears that another contagious wave may halt the recovering passenger flow. Southwest Airlines stock (NYSE: LUV) has lost 15% of its value in the last two months after reaching pre-Covid levels in April. Surprisingly, the company only had a $1 billion operating cash loss last year, because to the profits from the third phase of payroll support, which will help employees pay their salaries through September 2021.
Southwest stock has a strong chance of rising in the next month, according to the Trefis Machine Learning Engine, which analyzes tendencies in the company’s historical stock price data after a decline of more than 10% in the previous month.

Trefis 5 Day Returns

[Updated on May 14, 2021] – Buy Southwest Airlines Stock When It Drops
In recent months, the airline sector has benefited from progress in mass immunization and rising passenger numbers at TSA checkpoints. However, the tourism industry continues to be hampered by newly identified coronavirus variations that the WHO considers to be of concern, as well as restrictions on foreign travel. Unlike its immediate competitors, United Airlines and Delta Air Lines, Southwest Airlines’ (NYSE: LUV) stock has surged to pre-Covid levels. The company’s much lower debt outstanding and improved operating margin are partly responsible for this. After two rounds of payroll assistance, the US government has launched a third phase, citing the risk of involuntary furloughs due to high salary costs. The PSP-3, in particular, mandates airlines to put a moratorium on dividends and share repurchases until September 2022. Despite sluggish air travel demand, which is still 50% lower than pre-Covid levels, and macroeconomic uncertainty created by new coronavirus types, Trefis feels LUV stock is a strong long-term value buy. In this interactive dashboard analysis, Southwest Airlines’ Valuation, we highlight historical trends in the company’s revenues, profits, and valuation multiple.
Southwest’s balance sheet strength in 2020 was bolstered by government assistance.
Southwest Airlines reported $9 billion in total revenues in 2020, with just $1 billion in operating cash outflow due to $3.4 billion in CARES Act relief funding. The corporation received $1.7 billion in PSP-2 relief monies in Q1 2021, resulting in $645 million in operational cash. As a result, government assistance has been a crucial role in balancing salary-related costs (salary and wages account for 40 percent of operating expenses). The corporation had $10.7 billion in long-term debt and $14.4 billion in cash and short-term investments, according to recent filings, demonstrating effective capital and operations management during the epidemic. We anticipate the stock will recover short-term market declines owing to market forces, given the company’s stronger margins in comparison to peers.
ADDITIONAL INFORMATION FOR YOU
The downturn in the airline industry is likely to continue.
The company predicts a 40% drop in revenue in the second quarter compared to pre-Covid levels (Q2 2019). The increase in passenger numbers prompted all airline companies to revise their guidance, with the expectation of positive cash generation in the second half of the year. The recurrence of coronavirus infections in several nations, on the other hand, continues to have an influence on international and business travel demand. Furthermore, the third round of payroll support suggests that the slump in the air travel industry would certainly continue this year. For the second and third quarters, the corporation will earn a total of $1.9 billion to fund salaries and wages.
Is there a better option than Southwest Airlines for an investment? Southwest Airlines Stock Comparison Against Peers analyzes how LUV stacks up against its peers on key parameters. Peer Comparisons has a lot more of these kinds of valuable comparisons.
Here you may find all of Trefis’ Featured Analyses and Trefis Data./nRead More