Southwest Airlines (LUV) AI Stock Analysis

• Market Cap: $24.58B
• Dividend Yield: 1.73%
• Average Volume (3M): 8.21M
• Price to Earnings (P/E): 60.2
• Beta (1Y): 0.97
• Revenue Growth: 0.65%
• EPS Growth: N/A
• Country: US
• Employees: 71,506
• Sector: Industrials
• Sector Strength: 72
• Industry: Airlines, Airports & Air Services
• EPS (TTM): 0.58
• Shares Outstanding: 517,155,100
• 10 Day Avg. Volume: 11,275,081
• 30 Day Avg. Volume: 8,207,993
• PEG Ratio: 0.00
• Price to Book (P/B): 1.94
• Price to Sales (P/S): 0.73
• P/FCF Ratio: -12.43
• Enterprise Value/Market Cap: 1.10
• Enterprise Value/Revenue: 0.96
• Enterprise Value/Gross Profit: 5.50
• Enterprise Value/Ebitda: 12.03
• 1Y Price Target: $47.22
• Price Target Upside: -0.63% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 16
• EPS Forecast (FY): 3.68
• Revenue Forecast (FY): $31.17B

• Rating: 61 Neutral
• Price Target: $51.00 ▲(7.32% Upside)

The score is held back primarily by weak and volatile free cash flow and thin current margins despite improved revenue and balance-sheet deleveraging. Technicals are supportive with a strong uptrend, but an overbought RSI adds near-term risk. Valuation is a headwind due to a high P/E, partially offset by a constructive earnings call featuring strong 2026 EPS and RASM guidance.

Positive Factors

Stronger capital structure

Marked leverage reduction and a $3.2B cash balance alongside $2.6B of buybacks indicate a materially stronger capital structure. Lower gross leverage increases resilience to demand shocks, supports disciplined fleet capex and strategic optionality, and reduces refinancing risk over the medium term.

Successful transformation and product rollout

On‑time execution of large‑scale changes—800+ retrofits and new ancillary products—structurally diversifies revenue and upgrades customer experience. These moves should raise ancillary take rates, improve yield mix, and embed new revenue streams that sustain unit revenue growth beyond short‑term cycles.

Improved operational reliability

Top industry rankings in punctuality and completion reflect durable operational improvements. Better reliability lowers delay and recovery costs, strengthens customer retention and corporate contract appeal, and supports stable unit costs and revenue consistency across multiple quarters.

Negative Factors

Weak free cash flow

Near‑breakeven and volatile free cash flow materially limits financial flexibility. Weak FCF constrains debt reduction, repeatable buybacks or dividend increases, and reduces the buffer for capex or operational shocks, elevating execution risk during industry downturns or fuel spikes.

Compressed profitability and thin margins

Profitability has materially compressed versus prior peaks, leaving thin net margins. Persistently lower margins reduce returns on capital, limit reinvestment capacity, and make earnings highly sensitive to unit‑cost increases or weaker yield trends, challenging sustainable ROIC improvement.

Increased exposure to fuel volatility

Removing the fuel hedging program removes a layer of cost protection. Given thin margins and constrained free cash flow, greater exposure to fuel price swings can quickly pressure CASM and earnings, increasing profitability volatility and complicating multi‑period planning.

Southwest Airlines Business Overview & Revenue Model

Company Description

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, 2021, the company operated a total fleet of 728 Boeing 737 aircrafts; and served 121 destinations in 42 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as 10 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 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.

How the Company Makes Money

Southwest Airlines generates revenue primarily through the sale of passenger tickets, which constitutes the bulk of its earnings. The airline employs a low-cost carrier business model, focusing on short-haul flights that allow for quick turnaround times and high aircraft utilization. Additional revenue streams include ancillary services such as checked baggage fees, in-flight services, and priority boarding. The company also benefits from partnerships with travel-related businesses, including hotel chains and car rental services, which further enhance its revenue through cross-promotional opportunities. Additionally, its loyalty program, Rapid Rewards, drives repeat business and contributes to customer retention, thus solidifying its revenue base.

Southwest Airlines Financial Statement Overview

Summary

Revenue has recovered meaningfully and the balance sheet is healthier with sharply lower debt and a moderate debt-to-equity profile, but current profitability is thin versus prior peaks. The key drag is cash conversion: free cash flow is near breakeven and deteriorated significantly (including large negative FCF in 2024), limiting financial flexibility.

Income Statement

Revenue has expanded meaningfully since 2020 and remains up in TTM (Trailing-Twelve-Months), indicating continued demand resilience. However, profitability has compressed versus 2021–2022 levels: gross and operating margins are materially lower, and net margin in TTM (Trailing-Twelve-Months) is thin despite positive earnings. Overall, the income statement shows recovery and growth, but with weaker margin quality and limited buffer against cost or pricing pressure.

Balance Sheet

Leverage has improved markedly versus 2020–2023, with total debt down sharply in TTM (Trailing-Twelve-Months) and a moderate debt-to-equity profile. Equity remains sizable, and returns on equity are positive but modest, reflecting relatively low profitability for the capital employed. The balance sheet is healthier than prior years, though earnings power still looks subdued relative to the asset base.

Cash Flow

Cash generation is the key weak spot: while operating cash flow is positive in TTM (Trailing-Twelve-Months), free cash flow is near breakeven and has deteriorated significantly versus prior periods, including large negative free cash flow in 2024. Free cash flow also fails to consistently track reported earnings, signaling that reinvestment and working-capital needs are consuming cash. This reduces flexibility for debt reduction, shareholder returns, or downturn protection.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	28.06B	27.48B	26.09B	23.81B	15.79B	9.05B
Gross Profit	4.89B	4.46B	4.22B	4.75B	4.12B	-1.89B
EBITDA	2.24B	2.47B	2.39B	2.38B	3.03B	-2.69B
Net Income	441.00M	465.00M	465.00M	539.00M	977.00M	-3.07B
Balance Sheet
Total Assets	29.06B	33.75B	36.49B	35.37B	36.32B	34.59B
Cash, Cash Equivalents and Short-Term Investments	3.23B	8.72B	11.47B	12.29B	15.50B	13.33B
Total Debt	6.75B	8.06B	9.20B	9.47B	12.28B	12.20B
Total Liabilities	21.08B	23.40B	25.97B	24.68B	25.91B	25.71B
Stockholders Equity	7.98B	10.35B	10.52B	10.69B	10.41B	8.88B
Cash Flow
Free Cash Flow	-830.00M	-1.62B	-389.00M	-156.00M	1.81B	-1.64B
Operating Cash Flow	1.84B	462.00M	3.16B	3.79B	2.32B	-1.13B
Investing Cash Flow	-1.43B	-261.00M	-2.93B	-3.75B	-1.26B	-16.00M
Financing Cash Flow	-4.69B	-1.98B	-436.00M	-3.03B	359.00M	9.66B

Southwest Airlines Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 47.52
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LUV, the sentiment is Positive. The current price of 47.52 is above the 20-day moving average (MA) of 43.10, above the 50-day MA of 39.95, and above the 200-day MA of 33.67, indicating a bullish trend. The MACD of 1.29 indicates Negative momentum. The RSI at 69.76 is Neutral, neither overbought nor oversold. The STOCH value of 57.61 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for LUV.

Southwest Airlines Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DAL	70 Outperform	$43.02B	8.60	27.78%	0.96%	4.33%	-1.58%
UAL	68 Neutral	$33.12B	10.00	23.99%	―	4.24%	20.29%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
LUV	61 Neutral	$24.58B	60.15	4.81%	1.73%	0.65%	―
ALK	55 Neutral	$5.90B	58.06	2.36%	―	31.50%	-49.15%
JBLU	49 Neutral	$1.77B	-2.92	-25.29%	―	-2.49%	47.88%
AAL	47 Neutral	$8.78B	79.88	―	―	1.27%	118.64%

Southwest Airlines Corporate Events

Southwest Airlines Lowers 2025 EBIT Expectations Amid Challenges

Southwest Airlines has revised its expectations for full-year 2025 earnings before interest and taxes (EBIT), excluding special items, to approximately $500 million, down from the previous range of $600 million to $800 million. This adjustment is due to decreased revenue from a government shutdown and increased fuel prices, although bookings have since returned to expected levels.

The most recent analyst rating on (LUV) stock is a Hold with a $38.00 price target. To see the full list of analyst forecasts on Southwest Airlines stock, see the LUV Stock Forecast page.

Southwest Airlines Completes $1.5 Billion Debt Offering

On November 3, 2025, Southwest Airlines completed a public offering of $1.5 billion in debt securities, split equally between 4.375% Notes due 2028 and 5.250% Notes due 2035. This move is part of the company’s financial strategy to strengthen its capital structure and potentially enhance its market position.

The most recent analyst rating on (LUV) stock is a Sell with a $28.00 price target. To see the full list of analyst forecasts on Southwest Airlines stock, see the LUV Stock Forecast page.