Southwest (LUV) PT Lowered to $27 at Bernstein SocGen Group

Bernstein SocGen Group analyst David Vernon lowered the price target on Southwest (NYSE: LUV) to $27.00 (from $33.00) while maintaining a Market Perform rating.

The analyst commented: "Maintain Market-Perform for LUV, whose shifting business model could face even more challenges in this more difficult consumer demand backdrop. We believe LUV’s business model changes are going to be entering the market during very tumultuous times, making it much harder for the changes to take hold (shifting “premium” during a tougher economic backdrop to an existing customer base that typically sought out value / hurting brand loyalty with intro of bag fees = bad setup).

We reach our one-year price target of $27 (previously $33) by capitalizing our NTM+1 EBITDA estimate of $2.771B (previously $3.625B) at a multiple of 5.0x (unchanged), deducting the value of net debt one year from now, and adding proceeds from financing transactions related to the company’s new sale-leaseback strategy (this is a newer addition to our valuation methodology) using a 15% (unchanged) discount rate on $450MM (unchanged) per year from 2025 through 2027. Our $27 (previously $33) price target equates to 18.9x (previously 12.6x) our NTM+1 EPS estimate of $1.41 (previously $2.58)."

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