UPDATE: Deutsche Bank Upgrades Southwest (LUV) to Buy
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Deutsche Bank analyst Michael Linenberg upgraded Southwest (NYSE: LUV) from Hold to Buy with a price target of $64.00 (from $50.00).
The analyst comments "We are raising our 12-month price target (PT) on LUV shares from $50 to $64 which is derived by applying a ~7 EV/EBITDAR multiple to our 2022 EBITDAR estimate and a ~6 EV/EBITDAR multiple to our 2023 EBITDAR estimate (which compares to the stock's historical trading range of 6x - 8x, although multiples can trade above the range during a recession/recovery period). The downside risk to our price target is if we fail to see a leveling-off in new COVID-19 cases. Fuel price volatility is also a key downside/upside risk: every 10% move in jet fuel impacts our 2021 EPS estimate by $0.40. Other downside risk factors are economic weakness, government regulation, taxation, airport constraints, safety concerns, the threat of terrorism and war, associated costs/risks with labor negotiations and the revaluation of the stock market resulting in a higher equity risk premium being applied to airline shares.both are at or below the lower end of the stock’s historical trading range, which we think is a reasonable application in light of the current challenging demand environment)."
Shares of Southwest closed at $52.81 yesterday.
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