Deutsche Bank Downgrades Southwest (LUV) to Hold, 'See near-term EPS pressure'
Deutsche Bank analyst Michael Linenberg downgraded Southwest (NYSE: LUV) from Buy to Hold with a price target of $29.00 (from $32.00).
The analyst comments "We are lowering our 12-month price target on LUV's shares from $32 to $29. Our PT is derived by applying a ~4x EV/EBITDAR multiple to our 2024 EBITDAR estimate and a ~3.5x EV/EBITDAR multiple to our 2025 EBITDAR estimate (which compares with the stock's 6x - 8x mid-cycle EV/EBITDAR trading range). A key upside risk to our PT would be a better-than-expected pricing backdrop as proposed capacity cuts for the back half of 2024 yielded a better bottom-line result than currently forecast. A key downside risk to our price target would be management’s inability to execute on its strategic initiatives (with more details to be provided at an investor day planned for the fall). Fuel price volatility is also a key upside/downside risk: every 10% move in jet fuel impacts our 2024 EPS estimate by $0.80. Other downside risk factors are macroeconomic weakness, increased 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."
For an analyst ratings summary and ratings history on Southwest click here. For more ratings news on Southwest click here.
Shares of Southwest closed at $28.08 yesterday.