Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 5 Feb, 25 | SKYW | Buy | USD 118.96 | USD 126.0 | USD 130.0 | 14 days | 9.3% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
SkyWest, Inc., through its subsidiaries, engages in the operation of a regional airline in the United States. It operates through two segment, SkyWest Airlines and SWC; and SkyWest Leasing. The company is also involved in leasing regional jet aircraft and spare engines to third parties; and provision of on-demand charter, airport customer, and ground handling services. As of December 31, 2023, its fleet consisted of 603 aircraft; and provided scheduled passenger and air freight services with approximately 1,850 total daily departures to various destinations in the United States, Canada, and Mexico. SkyWest, Inc. was incorporated in 1972 and is headquartered in Saint George, Utah.
Net Income Increase: The company's net income for Q4 2024 was $97 million, a substantial improvement from $18 million in Q4 2023. This represents a 439% year-over-year increase, indicating enhanced profitability.
Revenue Growth: SkyWest's revenue for Q4 2024 increased by 26%, rising from $752 million in Q4 2023 to $944 million in Q4 2024. This significant increase reflects strong operational performance and higher flight production.
Cash and Marketable Securities Decrease: SkyWest's cash and marketable securities at December 31, 2024, decreased to $802 million, down from $836 million at the end of September 2024. This represents a 4% decline in liquidity during the quarter.
Operating Expenses Increase: Operating expenses for Q4 2024 rose to $800 million, up by 10% compared to $724 million in Q4 2023. The increase in expenses was driven by the higher flight production, potentially impacting overall profitability.
Key investment risks for SkyWest include potential volatility in operating expenses due to fluctuating flight production, reliance on deferred revenue from contracts, and exposure to economic or industry downturns that could impact demand for regional air services.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 118.96 | 107.0 | 126.0 | 130.0 |
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.
Q4 and Full Year 2024 Financial Results: SkyWest, Inc. reported robust financial results for the fourth quarter and full year of 2024. The company posted a pre-tax income of $134 million for Q4, with net income reaching $97 million, or $2.34 per diluted share. This compares to net income of $18 million, or $0.42 per diluted share, for the same period in 2023. For the full year, SkyWest reported pre-tax income of $432 million and net income of $323 million, or $7.77 per diluted share, marking a substantial improvement from the $34 million net income, or $0.77 per diluted share, reported in 2023.
Revenue and Flight Production Growth: SkyWest's revenue for Q4 2024 was $944 million, a 26% increase from $752 million in Q4 2023. This growth is primarily attributed to a 20% increase in block hour production during the quarter, which reflects improvements in captain availability since the previous year. Notably, SkyWest recognized $20 million of previously deferred revenue under its flying contracts in Q4 2024, compared to deferring $63 million of revenue in the same quarter in 2023. As of the end of 2024, the company reported a cumulative deferred revenue balance of $322 million under its flying contracts.
Operating Expenses and Efficiency Improvements: Operating expenses for Q4 2024 amounted to $800 million, reflecting a 10% increase from $724 million in the same period in 2023. The increase in expenses is mainly due to the higher flight production during the quarter. Despite the rise in expenses, the company continues to improve its operational efficiency and fleet utilization, positioning itself for sustained growth.
Capital Expenditures and Liquidity: SkyWest maintained a strong liquidity position with $802 million in cash and marketable securities as of December 31, 2024, slightly down from $836 million at the end of September 2024. The company's total debt remained stable at $2.7 billion, compared to $3.0 billion at the end of 2023. During Q4, SkyWest incurred capital expenditures totaling $186 million, primarily for the purchase of four debt-financed E175 aircraft, spare engines, and other fixed assets.
Share Repurchase Program: SkyWest continued to repurchase its shares as part of the share repurchase program authorized by its Board of Directors in May 2023. In Q4 2024, the company repurchased 47,000 shares for $4.9 million, at an average price of $104.51 per share. As of the end of 2024, SkyWest had $48 million remaining under its share repurchase authorization, which reflects its ongoing commitment to returning value to shareholders.
Fleet Expansion and Commercial Agreements: SkyWest remains focused on expanding its fleet in collaboration with major airline partners. The company took delivery of 25 E175 aircraft in 2024 and anticipates receiving eight more in 2025. By the end of 2026, SkyWest is scheduled to operate a total of 278 E175 aircraft. The company continues to optimize fleet deliveries and schedules, ensuring alignment with market demands and customer needs. Additionally, SkyWest secured a multi-year contract extension with American Airlines, which now includes a total of 74 CRJ700s under agreement.
CEO's Remarks and Operational Momentum: Chip Childs, CEO of SkyWest, expressed pride in the company's achievements and its recognition as one of the "World's Most Admired Companies" by Fortune Magazine for 2025. He highlighted the operational improvements made in restoring daily scheduled services to smaller communities, increasing fleet efficiency, and incorporating new aircraft into service. Childs also thanked the SkyWest team for their exceptional efforts, which have contributed to the company’s continued growth and success in the aviation industry.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on SkyWest, Inc (NASDAQ: SKYW) at the closing price of USD 118.96, as on February 04, 2025.
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) |
|---|---|---|---|---|---|---|---|---|
| SKYW SkyWest Inc |
-0.2 0.23% | 87.17 | 28.11 | - | 0.93 | 1.29 | 1.70 | 9.00 |
| RYAAY Ryanair Holdings PLC ADR |
0.26 0.60% | 42.62 | 13.54 | 12.12 | 2.42 | 3.76 | 1.88 | 7.44 |
| DAL Delta Air Lines Inc |
-1.56 3.58% | 42.04 | 7.76 | 5.87 | 0.45 | 2.81 | 0.83 | 8.98 |
| AICAF Air China Limited |
- -% | 0.67 | - | 26.74 | 0.14 | 1.75 | 2.02 | 67.07 |
| RYAOF Ryanair Holdings PLC |
- -% | 12.00 | 8.35 | 7.81 | 1.82 | 2.20 | 1.80 | 6.53 |
Data Powered by EOD Historical Data (“EODHD”).
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 is February 04, 2025. The reference data in this report has been partly sourced from REFINITIV.
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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