UPDATE: Susquehanna Upgrades Southwest (LUV) to Positive; Sees MASM Recovery Into 2023
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(Updated - July 12, 2022 7:25 AM EDT)
Susquehanna analyst Christopher Stathoulopoulos upgraded Southwest (NYSE: LUV) from Neutral to Positive with a price target of $45.00.
The analyst commented, "Coming out of LUV’s December 2021 investor day, our primary concern was around the FY22 CASM-ex guide (+8-12% vs. 2019); specifically, whether LUV would be able to drive margin recovery into 2023 against an “atypical” LCC unit cost profile. While LUV has since raised its FY22 CASM-ex guide (as of April, +12-16% Yo3), we believe that various revenue initiatives, including its new fare class (Wanna Get Away Plus) and push into corporate travel, should help support MASM recovery into 2023, with any new labor contracts already contemplated in its long-term guide. Furthermore, we believe LUV has ample liquidity to weather a downturn (exiting 1Q, ~$17B in liquidity, with unencumbered assets of >$11B), with our conservative operating assumptions for FY23 (ASMs +4% Y/Y, with RASM and CASM-ex +1% and +2%, respectively) implying a pre-pandemic leverage profile into 2024."
Shares of Southwest closed at $36.83 yesterday.
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