Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Position Status | Return(%)* |
|---|---|---|---|---|---|---|---|---|
| 1 Apr, 26 | LUV | Buy | USD 37.57 | USD 39.5 | USD 41.5 | 7 days | Closed |
13.99%
|
*Return(%) represent the percentage change between the entry price and exit price of the recommendation.
Data Powered by EOD Historical Data (“EODHD”).
Southwest Airlines Co. operates as a passenger airline company that provide scheduled air transportation services in the United States and near-international markets. As of December 31, 2022, the company operated a total fleet of 770 Boeing 737 aircrafts; and served 121 destinations in 42 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as ten near-international countries, including Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos. It also provides inflight entertainment portal and connectivity services on Wi-Fi enabled aircrafts; and Rapid Rewards loyalty program that enables program members to earn points for dollars spent on Southwest base fares. In addition, the company offers a suite of digital platforms to support customers' travel needs, including websites and apps; and SWABIZ, an online booking tool. Further, it provides ancillary services, such as Southwest's EarlyBird Check-In, upgraded boarding, and transportation of pets and unaccompanied minors. The company was incorporated in 1967 and is headquartered in Dallas, Texas.
Revenue Expansion: FY25 revenue at USD 28.06 billion versus FY24 lower base reflects +1.7% YoY growth
EBIT Outperformance: FY25 EBIT at USD 574 million exceeded prior guidance of USD 500 million
RASM Pressure: Q4 FY25 RASM declined by 0.2% YoY, indicating pressure on unit revenues despite broader demand recovery
Rising Cost Pressures (CASM): CASM-ex increased modestly (Q4 FY25 +0.8% YoY), reflecting cost inflation pressures relative to FY24 levels
Southwest Airlines’ key investment risk lies in the execution uncertainty of its large-scale business model transformation, where failure to sustain ancillary revenue growth, manage cost inflation, or maintain operational reliability could materially impact margins and earnings trajectory
| Entry Price | Support* | Target 1** | Target 2** |
|---|---|---|---|
| 37.57 | 33.5 | 39.5 | 41.5 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
**Target prices may vary by ±0.5% depending on market volatility.
Revenue Growth and Demand Resilience: Southwest Airlines reported record operating revenues during FY25, reaching approximately USD 28 billion, reflecting a year-on-year increase of 1.7% compared to FY24. This growth was supported by resilient passenger demand, improved traffic volumes, and better realized fares driven by strategic pricing initiatives. Despite macro uncertainties and industry-wide pressures, the company demonstrated demand stability across both leisure and business segments, aided by network breadth and customer loyalty.
Earnings Performance and Margin Expansion: The company delivered full-year EBIT of USD 574 million, exceeding its internal guidance of USD 500 million, indicating improving profitability trends. Adjusted EPS for FY25 stood at USD 0.93, slightly below consensus expectations but reflecting a meaningful recovery trajectory from prior volatility. Margin expansion was supported by cost optimization initiatives and early benefits from structural transformation efforts implemented during the year.
Operational Excellence and Efficiency Gains: Operationally, Southwest achieved industry-leading performance, ranking first in on-time performance, completion factor, and lowest extreme delays during key periods. Capacity grew by approximately 5.8% in Q4 FY25 despite a relatively flat fleet count, reflecting improved aircraft utilization through reduced turnaround times and the introduction of redeye flights. These initiatives enhanced efficiency while maintaining high service reliability.
Strategic Transformation and Revenue Initiatives: FY25 marked a pivotal transformation phase for Southwest, with multiple revenue-enhancing initiatives implemented. These included the introduction of bag fees, launch of a basic economy fare, changes to the Rapid Rewards program, and expansion of distribution channels via partnerships with platforms such as Expedia and Priceline. Additionally, product innovations such as assigned seating and extra legroom offerings were introduced, positioning the company to capture higher-yield customers and ancillary revenue streams.
Cost Discipline and Efficiency Measures: The company outperformed its cost reduction target of USD 370 million for FY25, supported by structural cost controls, workforce optimization, and operational efficiencies. CASM-ex remained tightly managed, increasing marginally despite capacity adjustments. The company also discontinued its fuel hedging program, reflecting a shift toward a more flexible cost structure while continuing to pursue fuel efficiency initiatives.
Capital Allocation and Balance Sheet Strength: Southwest maintained a strong financial position, supported by disciplined capital allocation. During FY25, the company executed share buybacks of USD 2.6 billion, representing approximately 14% of shares outstanding, and distributed USD 399 million in dividends. The balance sheet remained robust, with USD 3.2 billion in cash and a gross leverage ratio of 2.4x, consistent with maintaining an investment-grade profile.
Network Expansion and Customer Experience Enhancements: The airline expanded its network and customer offering through new airline partnerships, enhanced loyalty benefits, and the launch of bundled travel services such as Getaways by Southwest. Investments in digital capabilities, free WiFi for loyalty members, and improved cabin configurations further enhanced customer experience. These initiatives collectively reflect a shift toward a more diversified and premium-oriented service model.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given to Southwest Airlines (NYSE: LUV) at the closing market price of USD 37.57, as on Mar 31, 2026
Data Powered by EOD Historical Data (“EODHD”).
Sector: Industrials Industry: Airlines
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| LUV Southwest Airlines Company |
0.23 0.56% | 41.54 | 36.42 | 10.89 | 0.68 | 1.57 | 0.58 | 6.34 |
| DAL Delta Air Lines Inc |
-0.09 0.11% | 79.42 | 10.39 | 12.61 | 0.71 | 2.30 | 0.95 | 9.84 |
| RYAAY Ryanair Holdings PLC ADR |
0.01 0.02% | 56.98 | 13.54 | 12.12 | 2.42 | 3.76 | 1.88 | 7.44 |
| BABWF International Consolidated Airlines Group S.A. |
0.12 2.11% | 5.80 | 6.38 | 6.23 | 0.71 | 2.64 | 0.81 | 3.36 |
| RYAOF Ryanair Holdings PLC |
- -% | 25.30 | 8.35 | 7.81 | 1.82 | 2.20 | 1.80 | 6.53 |
Data Powered by EOD Historical Data (“EODHD”).
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels as on April 1, 2026. The reference data in this report has been partly sourced from REFINITIV.
Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned has been achieved and is subject to the factors discussed above.
Note 4: StockNextt reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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