Southwest Airlines (LUV) AI Stock Analysis

• Market Cap: $16.13B
• Dividend Yield: 2.32%
• Average Volume (3M): 11.51M
• Price to Earnings (P/E): 46.2
• Beta (1Y): 1.07
• Revenue Growth: 1.64%
• EPS Growth: 284.24%
• Country: US
• Employees: 71,506
• Sector: Industrials
• Sector Strength: 84
• Industry: Airlines, Airports & Air Services
• EPS (TTM): 0.43
• Shares Outstanding: 525,187,700
• 10 Day Avg. Volume: 9,669,689
• 30 Day Avg. Volume: 11,510,896
• PEG Ratio: N/A
• Price to Book (P/B): 0.00
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 1.18
• Enterprise Value/Revenue: 0.69
• Enterprise Value/Gross Profit: 2.13
• Enterprise Value/Ebitda: 8.25
• 1Y Price Target: $31.08
• Price Target Upside: 0.36% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 15

• Rating: 49 Neutral
• Price Target: $30.00 ▼(-3.13% Downside)

Southwest Airlines' financial performance is stable, but concerns arise due to weak profitability and negative cash flow. Technical analysis indicates bearish market sentiment, while valuation metrics suggest the stock may be overvalued. These factors combined lead to a cautious outlook for the stock.

Positive Factors

Cost Management

Management has successfully implemented strategies that led to cost reductions, with two-thirds of managers reporting lower costs in the first quarter.

International Expansion

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

Revenue Growth

Southwest Airlines' current/pending initiatives, such as assigned seating, checked bag fees and inflows from foreign partnerships could support higher unit revenue.

Negative Factors

Debt Levels

Southwest Airlines is transitioning to over $2B of net debt, contrasting with other airlines focusing on lowering net debt levels.

Earnings Performance

Southwest Airlines' 2Q25 EPS of $0.43 missed estimates, indicating weaker performance than expected.

Profitability Challenges

The 3Q25 outlook implies an EPS loss, further indicating challenges in profitability.

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 ticket sales, which constitute the bulk of its income. The airline employs a low-cost fare structure that encourages high volume travel while also offering various fare classes to cater to different customer segments. Additionally, Southwest earns revenue from ancillary services, such as early boarding, baggage fees, and in-flight sales, though it prides itself on having no change fees which can attract more travelers. The company also benefits from partnerships with hotels, car rental companies, and travel agencies, allowing customers to bundle services and generating additional revenue streams. The loyalty program, Rapid Rewards, also contributes to repeat business and customer retention, enhancing overall profitability.

Southwest Airlines Financial Statement Overview

Summary

Southwest Airlines exhibits a stable financial position with strong equity and low leverage. However, challenges in profitability and cash flow generation persist. The company shows resilience with solid operating cash flow but needs to address its declining revenue growth and negative free cash flow to improve profitability and investor returns.

Income Statement

Southwest Airlines shows a stable gross profit margin at 34.1% for TTM, with a modest net profit margin of 1.4%. Revenue growth is low with a slight decline of 0.04% in the latest annual data. The EBIT margin is weak at 1.2%, reflecting operational challenges. However, the EBITDA margin of 8.5% indicates decent operating cash generation despite low profitability.

Balance Sheet

The company's balance sheet is strong, with a low debt-to-equity ratio of 0.16 as of TTM, which suggests financial stability. The equity ratio of 47.2% denotes a solid equity base. Despite this, the return on equity is relatively low at 4.9%, indicating limited profitability on shareholders' investments.

Cash Flow

The cash flow situation is mixed, with a negative free cash flow reflecting high capital expenditures. The operating cash flow to net income ratio is robust at 4.72, demonstrating efficient cash conversion. However, the free cash flow to net income ratio is negative, indicating challenges in generating free cash.

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

Southwest Airlines Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 30.97
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LUV, the sentiment is Negative. The current price of 30.97 is below the 20-day moving average (MA) of 32.26, below the 50-day MA of 32.95, and below the 200-day MA of 31.36, indicating a bearish trend. The MACD of -1.12 indicates Positive momentum. The RSI at 43.75 is Neutral, neither overbought nor oversold. The STOCH value of 56.89 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for LUV.

Southwest Airlines Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
RYAAY	82 Outperform	$32.47B	15.49	27.12%	1.29%	10.61%	37.32%
DAL	81 Outperform	$38.16B	8.48	30.07%	1.07%	3.01%	-0.90%
UAL	80 Outperform	$31.88B	9.87	27.70%	―	4.23%	13.13%
Sector *	63 Neutral	$10.83B	16.63	7.96%	2.06%	2.20%	-16.67%
AAL	62 Neutral	$8.56B	16.69	-21.27%	―	1.50%	―
LUV	49 Neutral	$16.13B	46.20	4.30%	2.32%	1.64%	284.24%
JBLU	49 Neutral	$1.74B	―	-15.12%	―	-1.90%	61.06%

Southwest Airlines Corporate Events

Southwest Airlines Announces $2 Billion Share Buyback

On July 23, 2025, Southwest Airlines announced a new $2.0 billion share repurchase program, reflecting confidence in its transformational plan and strong management execution. The company reported a net income of $213 million for the second quarter of 2025 and highlighted several initiatives, including the introduction of bag fees and a basic economy product, which exceeded financial expectations. Despite a decrease in passenger and operating revenues, the company remains optimistic about future growth, supported by recent improvements in industry demand and its strategic initiatives.

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 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.