Citi analyst Stephen Trent reiterated a Sell rating on Southwest Airlines yesterday and set a price target of $22.00.
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Stephen Trent has given his Sell rating due to a combination of factors impacting Southwest Airlines. The airline’s current initiatives, such as assigned seating and checked bag fees, are expected to increase unit revenue, but the potential for a significant revenue boost in the fourth quarter of 2025 appears unlikely. This skepticism is reinforced by weaker-than-expected second-quarter results and a soft third-quarter outlook, which suggest that the risk/reward balance for Southwest’s shares is not favorable at present.
Additionally, Trent’s model adjustments for Southwest include expectations of lower unit revenue and higher costs per available seat mile, excluding fuel. Despite a slight decrease in 2026 earnings per share estimates, the target multiple for the stock has been adjusted to align with that of American Airlines. Although Southwest maintains a strong balance sheet, its free cash flow conversion has deteriorated compared to its pre-pandemic performance and now lags behind the major airlines. The forecast for the fourth quarter presents a challenging scenario, as Southwest would need to achieve a significant earnings before interest and taxes to meet management’s guidance, a feat not accomplished since 2018.
In another report released on July 25, Bank of America Securities also reiterated a Sell rating on the stock with a $26.00 price target.
Based on the recent corporate insider activity of 64 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of LUV in relation to earlier this year.