Southwest Airlines Co.
LUV
$0.00
-1.65%
Southwest Airlines Co. is the largest domestic air carrier in the United States, operating within the Airlines, Airports & Air Services industry. It is defined by its point-to-point network specializing in short-haul, leisure flights with a simple, all-Boeing 737 fleet, a model it is evolving to include new fare categories and assigned seating.…
LUV
Southwest Airlines Co.
$0.00
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Investment Opinion: Should I buy LUV Today?
Based on a synthesis of the data, the objective assessment is a Hold rating. The stock's deeply discounted forward P/E of 7.8 and P/S ratio below 1.0 are compelling for value-oriented investors, suggesting significant upside if the company's earnings recovery continues. However, these valuation positives are counterbalanced by severe near-term technical weakness, concerning liquidity metrics, and the stock's high sensitivity to unpredictable factors like geopolitics and oil prices. The mixed institutional ratings (from Buy to Sell) reflect this uncertainty. Investors should wait for confirmation of sustained profitability improvement and stronger cash flow generation before establishing a new position.
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LUV 12-Month Price Forecast
The data paints a conflicting picture: compelling valuation versus weak fundamentals. The path of least resistance appears neutral to slightly negative in the short term due to powerful momentum and liquidity headwinds. Any sustained bullish move requires a clear reversal in both the company's cash flow and the broader macro narrative for airlines.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Southwest Airlines Co.'s 12-month outlook, with a consensus price target around $0.00 and implied upside of — versus the current price.
Average Target
$0.00
6 analysts
Implied Upside
—
vs. current price
Analyst Count
6
covering this stock
Price Range
$0 - $0
Analyst target range
No sufficient analyst coverage available. The provided data includes six analyst estimates for future EPS and revenue, but does not contain a consensus target price or a breakdown of buy/hold/sell ratings. The institutional ratings list shows recent actions from various firms, including 'Buy' from UBS and TD Cowen, 'Neutral' from Citigroup, 'Equal Weight' from Wells Fargo, and a 'Sell' from Rothschild & Co, indicating a mixed but generally cautious view from covering institutions.
Bulls vs Bears: LUV Investment Factors
Southwest Airlines presents a classic value trap scenario. While its forward valuation multiples appear cheap and quarterly profitability is improving, the company faces significant headwinds including poor liquidity, negative cash flow, and severe recent stock price deterioration. The investment thesis hinges on a successful execution of its new business strategy and a favorable macro environment for airlines.
Bullish
- Attractive Forward Valuation: Forward P/E of 7.8 and P/S of 0.8 suggest the stock is cheap if earnings recover.
- Strong 6-Month Relative Strength: Outperformed S&P 500 by 19% over six months, showing investor interest.
- Improving Quarterly Profitability: Net income recovered from a Q1 loss to $323M profit in Q4 2025.
- Positive Geopolitical Catalyst: Potential US-Iran ceasefire could lower fuel costs and boost airline stocks.
Bearish
- Severe Short-Term Weakness: Stock down 23.7% in one month, underperforming the S&P 500 by 18.5%.
- Poor Financial Health: Current ratio of 0.52 indicates liquidity risk. Negative TTM free cash flow of -$830M.
- Low Profitability Margins: Trailing net margin is only 1.57%. ROE of 5.5% and ROA of 0.95% are weak.
- High Trailing P/E Ratio: Trailing P/E of 50.6 reflects very low current earnings, signaling fundamental weakness.
LUV Technical Analysis
The stock has experienced significant volatility over the past six months, with a strong rally from around $32 in October 2025 to a peak above $54 in February 2026, followed by a sharp correction. The 6-month price change is +16.28%, significantly outperforming the S&P 500's -2.82% over the same period, indicating strong relative strength in that timeframe. However, recent performance has been weak, with a 1-month decline of -23.73% and a 3-month decline of -9.10%, both underperforming the broader market. The current price of $37.57 sits approximately 32% above its 52-week low of $23.82 and about 32% below its 52-week high of $55.11, positioning it in the lower-middle portion of its annual range. The stock's beta of 1.094 suggests it is slightly more volatile than the market, which is consistent with the observed price swings. No RSI data was provided for a current momentum assessment. The price action shows a clear downtrend from the February highs, with the stock breaking below key support levels, most recently trading near the $37-$38 zone. The significant underperformance over the last one and three months highlights strong selling pressure and negative momentum in the short term.
Beta
1.18
1.18x market volatility
Max Drawdown
-33.8%
Largest decline past year
52-Week Range
$24-$55
Price range past year
Annual Return
+18.0%
Cumulative gain past year
| Period | LUV Return | S&P 500 |
|---|---|---|
| 1m | -21.3% | -4.3% |
| 3m | -9.0% | -4.0% |
| 6m | +15.6% | -2.0% |
| 1y | +18.0% | +22.2% |
| ytd | -9.0% | -3.8% |
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LUV Fundamental Analysis
Revenue and profitability show a mixed but improving trend. Q4 2025 revenue of $7.44B grew 7.4% year-over-year from Q4 2024. Net income for Q4 2025 was $323M, a significant improvement from a net loss of -$149M in Q1 2025, indicating a recovery in profitability through the year. The trailing twelve-month net margin is a thin 1.57%, reflecting the industry's challenging cost environment. Financial health is a concern, with a current ratio of 0.52 indicating potential short-term liquidity pressure, as current assets cover only about half of current liabilities. The debt-to-equity ratio of 0.75 is moderate. Cash flow is weak, with free cash flow for the trailing twelve months reported at -$830M, and operating cash flow for the latest quarter was a modest $295M. Operational efficiency metrics are subdued. Return on Equity (ROE) is 5.53% and Return on Assets (ROA) is 0.95%, both indicating low profitability relative to the capital base. The company's asset turnover and other efficiency ratios were not highlighted in the provided key metrics, but the low ROA suggests room for improvement in generating profits from its asset base.
Quarterly Revenue
$7.4B
2025-12
Revenue YoY Growth
+0.07%
YoY Comparison
Gross Margin
+0.20%
Latest Quarter
Free Cash Flow
$-830000000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is LUV Overvalued?
Given the company has positive net income, the primary valuation metric is the Price-to-Earnings (P/E) ratio. The trailing P/E ratio is extremely high at 50.6, which is distorted by low earnings. The forward P/E ratio, based on analyst estimates, is a more reasonable 7.84. The Price-to-Sales (P/S) ratio is 0.80, and the Enterprise Value-to-Sales (EV/Sales) is 0.76, suggesting the market values the company at less than one times its revenue. Peer comparison data for industry averages was not provided in the valuation inputs. However, the forward P/E of 7.8 and P/S below 1.0 could be considered low relative to historical norms or growth expectations, but this must be weighed against the company's thin margins, negative free cash flow, and the cyclical nature of the airline industry. The high PEG ratio of 41.0 signals the market expects very low future earnings growth relative to the current P/E.
PE
50.6x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range -33x~93x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
11.2x
Enterprise Value Multiple
Investment Risk Disclosure
The primary risk is financial health, highlighted by a current ratio of 0.52, which suggests the company may struggle to meet short-term obligations without additional financing or asset sales. The negative trailing twelve-month free cash flow of -$830 million exacerbates this liquidity concern. Operationally, the airline industry is highly cyclical and exposed to volatile fuel costs, as recent news about oil price spikes and potential ceasefires underscores. A beta of 1.094 confirms the stock's above-market volatility. Furthermore, the company's thin net margin of 1.57% and low returns on equity (5.53%) and assets (0.95%) indicate it has little buffer against economic downturns or competitive pressures. The lack of a clear analyst consensus target price adds to the uncertainty surrounding the stock's fair value.