Southwest Airlines (LUV) AI Stock Analysis

• Market Cap: $19.37B
• Dividend Yield: 2.12%
• Average Volume (3M): 11.48M
• Price to Earnings (P/E): 40.4
• Beta (1Y): 1.01
• Revenue Growth: 3.26%
• EPS Growth: 27.77%
• Country: US
• Employees: 71,506
• Sector: Industrials
• Sector Strength: 86
• Industry: Airlines, Airports & Air Services
• EPS (TTM): -0.13
• Shares Outstanding: 569,865,800
• 10 Day Avg. Volume: 11,739,653
• 30 Day Avg. Volume: 11,476,320
• PEG Ratio: 2.01
• Price to Book (P/B): 1.96
• Price to Sales (P/S): 0.00
• P/FCF Ratio: -31.77
• Enterprise Value/Market Cap: 0.92
• Enterprise Value/Revenue: 0.16
• Enterprise Value/Gross Profit: 3.49
• Enterprise Value/Ebitda: 1.98
• 1Y Price Target: $30.36
• Price Target Upside: -10.68% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 15

• Rating: 68 Neutral
• Price Target: $36.00 ▲(5.91%Upside)

The overall stock score of Southwest Airlines is driven by strong technical indicators and a solid operational performance despite macroeconomic challenges. High valuation metrics and recent financial losses present cautionary elements. Continued focus on recovery initiatives and cost management could support future improvements.

Positive Factors

Financial Performance

Southwest reported a narrower-than-anticipated loss reflecting record first-quarter revenue and accelerated cost-cutting.

Operational Strategy

Southwest Airlines has $1.8 billion worth of initiatives aimed at improving earnings by focusing on revenue management, cost reduction, and enhancing loyalty programs.

Strategic Partnerships

The interline partnership with China Airlines will increase Southwest's international connectivity.

Negative Factors

Demand Concerns

Travel demand is expected to moderate and costs are anticipated to rise, impacting Southwest's financial performance.

Financial Guidance

The company is pulling the full year guidance, which suggests uncertainty in future performance.

Market Expectations

The 2Q25 guidance is well below the street’s estimate, indicating potential challenges ahead.

Southwest Airlines Business Overview & Revenue Model

Company Description

Southwest Airlines Co. (NYSE: LUV) is a major American airline headquartered in Dallas, Texas. Founded in 1967, it operates one of the world's largest low-cost carrier services, primarily offering domestic flights within the United States. Southwest Airlines is renowned for its customer-friendly policies, including no change fees and two free checked bags, and focuses on point-to-point service rather than the traditional hub-and-spoke model.

How the Company Makes Money

Southwest Airlines generates revenue primarily through the sale of passenger tickets, which is its largest revenue stream. The airline offers low-cost fares and targets cost-conscious travelers, which helps maintain high load factors. Additionally, Southwest earns ancillary revenue from services such as EarlyBird Check-In, which allows passengers to secure a better boarding position, and other optional services. The company also benefits from partnerships with hotels, car rental agencies, and other travel-related businesses, enhancing its revenue through loyalty programs and cross-promotional activities. Furthermore, Southwest Airlines has a robust Rapid Rewards program that helps drive customer loyalty and repeat business, contributing significantly to its financial performance.

Southwest Airlines Financial Statement Overview

Summary

Southwest Airlines shows a strong recovery with improving revenue and profitability metrics, underpinned by a stable balance sheet and manageable leverage. However, challenges in free cash flow generation and relatively low return on equity highlight areas for potential improvement.

Income Statement

Southwest Airlines demonstrates a strong recovery trajectory with a consistent increase in total revenue over the years, reaching $27.58 billion in the TTM. The gross profit margin improved significantly from negative in 2020 to approximately 26.3% in the TTM, indicating enhanced operational efficiency. The net profit margin, while modest at 1.98% in the TTM, reflects a positive trend from previous losses. However, the EBIT and EBITDA margins remain relatively low, signaling room for improvement in core earnings. Overall, the income statement reflects a solid recovery with potential for stronger profitability.

Balance Sheet

The balance sheet reveals a stable financial position with a notable cash reserve of $8.25 billion in the TTM. The debt-to-equity ratio decreased to approximately 0.42, indicating manageable leverage and improved financial stability. The equity ratio stands at 43.6%, suggesting a healthy proportion of equity financing. However, the return on equity (ROE) at 5.83% in the TTM is relatively low, highlighting the need for enhanced profitability to maximize shareholder returns. The balance sheet reflects a stable financial structure with a conservative approach to debt management.

Cash Flow

The cash flow statement shows a mixed performance with an operating cash flow of $1.43 billion in the TTM, suggesting operational stability. However, the free cash flow remains negative at -$563 million due to higher capital expenditures, indicating potential challenges in generating surplus cash for investments. The operating cash flow to net income ratio is strong, reflecting efficient cash generation relative to profits. Despite improvements, the cash flow position requires attention to enhance liquidity and support growth initiatives.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	27.58B	27.48B	26.09B	23.81B	15.79B	9.05B
Gross Profit	5.08B	4.46B	4.22B	4.75B	4.12B	-1.89B
EBITDA	2.58B	2.47B	2.39B	2.38B	3.03B	-2.70B
Net Income	546.00M	465.00M	465.00M	539.00M	977.00M	-3.07B
Balance Sheet
Total Assets	33.21B	33.75B	36.49B	35.37B	36.32B	34.59B
Cash, Cash Equivalents and Short-Term Investments	8.25B	8.72B	11.47B	12.29B	15.50B	13.33B
Total Debt	8.00B	8.06B	9.23B	9.43B	12.28B	12.20B
Total Liabilities	23.85B	23.40B	25.97B	24.68B	25.91B	25.71B
Stockholders Equity	9.37B	10.35B	10.52B	10.69B	10.41B	8.88B
Cash Flow
Free Cash Flow	-563.00M	-1.62B	-389.00M	-156.00M	1.81B	-1.64B
Operating Cash Flow	1.43B	462.00M	3.16B	3.79B	2.32B	-1.13B
Investing Cash Flow	948.00M	-261.00M	-2.93B	-3.75B	-1.26B	-16.00M
Financing Cash Flow	-2.61B	-1.98B	-436.00M	-3.03B	359.00M	9.66B

Southwest Airlines Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 33.99
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

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 33.99 is above the 20-day moving average (MA) of 32.34, above the 50-day MA of 31.07, and above the 200-day MA of 30.79, indicating a bullish trend. The MACD of 0.37 indicates Negative momentum. The RSI at 64.44 is Neutral, neither overbought nor oversold. The STOCH value of 92.97 is Negative, 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
UAL	80 Outperform	$26.14B	7.38	33.57%	―	5.31%	35.95%
DAL	78 Outperform	$32.73B	8.89	27.52%	1.20%	4.91%	-27.21%
RYAAY	73 Outperform	$29.94B	18.55	22.41%	1.59%	3.12%	-13.82%
LUV	68 Neutral	$19.37B	40.36	5.63%	2.12%	3.26%	27.77%
Sector *	65 Neutral	$10.69B	15.75	5.51%	1.90%	2.72%	-26.43%
AAL	64 Neutral	$7.67B	13.43	-21.27%	―	1.92%	36.07%
JBLU	43 Neutral	$1.55B	―	-11.30%	―	-3.02%	66.90%

Southwest Airlines Corporate Events

Southwest Airlines Concludes Annual Shareholders Meeting

On May 14, 2025, Southwest Airlines held its Annual Meeting of Shareholders where several key proposals were voted on. Thirteen directors were elected for terms expiring in 2026, executive compensation was approved, Ernst & Young LLP was ratified as the independent auditor, and a shareholder proposal to amend the clawback policy for unearned executive pay was rejected.

The most recent analyst rating on (LUV) stock is a Buy with a $42.00 price target. To see the full list of analyst forecasts on Southwest Airlines stock, see the LUV Stock Forecast page.

Southwest Airlines Amends Bylaws Following Texas Code Changes

On May 16, 2025, Southwest Airlines‘ Board of Directors approved amendments to the company’s bylaws in response to changes in the Texas Business Organizations Code. These amendments set a minimum ownership threshold for shareholders to initiate derivative proceedings and designate specific courts for internal claims, while also waiving the right to a jury trial for such claims. These changes aim to streamline legal processes and potentially impact shareholder litigation dynamics.

The most recent analyst rating on (LUV) stock is a Buy with a $42.00 price target. To see the full list of analyst forecasts on Southwest Airlines stock, see the LUV Stock Forecast page.

Southwest Airlines Reports Q1 2025 Net Loss

On April 23, 2025, Southwest Airlines reported a net loss of $149 million for the first quarter of 2025, despite achieving record operating revenues of $6.4 billion. The company is implementing several initiatives to improve financial performance, including cost reduction plans, new distribution channels, and loyalty program optimization. Southwest Airlines is also preparing to introduce basic economy and bag fees, and plans to sell assigned and extra legroom seats starting in the third quarter of 2025. The company is adjusting its capacity to align with a lower demand environment and remains committed to maintaining a strong balance sheet.