Southwest Airlines upgraded at Jefferies after selloff
Jefferies upgraded Southwest Airlines (LUV) to Hold from Underperform and raised their price target to $28 from $20. The stock sold off on Tuesday after Southwest announced it was reducing its capacity plans and reevaluating its full-year guidance because Boeing (BA) told the company it couldn't deliver as many 737 Max planes as initially expected. Jefferies analysts say that following the selloff, Southwest's shares are "now fairly valued."
Yahoo Finance's Seana Smith and Madison Mills discuss the call in the video above.
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Editor's note: This article was written by Stephanie Mikulich
Video Transcript
SEANA SMITH: Today's stock to watch is Southwest. Shares moving to the upside, up just about 4/10 of a percent. Jefferies upgrading the airline to hold from underperform, raising its price target to $28 a share right around where it's trading today. That's up from $20 a share, saying that the move to the downside that we saw yesterday, at least in their view, finding a floor right now in the stock price.
But, Maddie, we got to go back to really what played out yesterday and how that then plays in to this call today with Southwest being a top trader on Yahoo Finance now for the second day in a row. We got the warning yesterday. Executives were speaking at a conference here just warning about the delayed deliveries here from Boeing and what that means for their business and saying that it's going to have a real impact just on capacity and their routes that are available here this year and going forward.
So it's going to be an issue here in the current quarter and for several quarters. So we saw Southwest have its worst day that we've seen in just about four years. So because of that drop, now Jefferies a little bit more constructive on the current valuation of the stock.
MADISON MILLS: Well, it's really interesting reading through the Jefferies note because they see the lack of deliveries from Boeing as potentially a boon for a company like Southwest because it frees up a little bit of more cash for them, right? If those Max aircrafts are not going to be able to get delivered, that frees up a little bit of cash for a company like Southwest that's been struggling with their cash flow.
Also interesting in their note, they talk about potential pressures for the US consumer. And they cite student loans as another headwind for consumer spending on flights moving forward. And I find it interesting that we're still continuing to see folks across the street citing that as a potential headwind here. And then when you look across the board, it does look like Southwest, one of the only airlines up this morning potentially off of that news and one of the reasons why they're probably one of our trending tickers on the platform this morning.
SEANA SMITH: Yeah, certainly trading to the upside there. But we're seeing a mixed picture for airlines here for a second day in a row following much of the pressure that we saw yesterday
MADISON MILLS: Absolutely.
SEANA SMITH: Many of those names in the red.
