Friday - Wolfe Research has upgraded shares of Alaska Air (NYSE:ALK) from Peer Perform to Outperform, setting a new price target of $55.00. The firm cites a combination of favorable earnings potential and attractive valuation for the airline, which is experiencing beneficial trends on the West Coast.
The upgrade reflects a positive outlook on the legacy airline sector, emphasizing international routes, premium cabin offerings, and loyalty program benefits. Alaska Air, in particular, is noted for its emerging tailwinds, including an accelerating corporate recovery, improving competitive capacity, and lower regional jet fuel prices.
Wolfe Research's assessment points to a favorable mix of earnings per share (EPS) upside for Alaska Air and its current market valuation. The new price target of $55.00 is based on a valuation approach that includes an 8x price-to-earnings (P/E) and 5x enterprise value-to-EBITDAR (EV/EBITDAR) multiple.
The analyst's commentary acknowledges the broader preference for legacy airlines at present but highlights Alaska Air's specific advantages. These advantages are expected to contribute to the airline's performance and offer a compelling case for the upgrade.
InvestingPro Insights
According to InvestingPro data, Alaska Air (NYSE:ALK) has a current market capitalization of $5.49 billion, with a P/E ratio that stands at 22.35, reflecting investor expectations of future earnings. Notably, the P/E ratio adjusted for the last twelve months as of Q1 2024 is more attractive at 10.21, indicating a potentially undervalued stock relative to its earnings. This aligns with Wolfe Research's positive valuation assessment. The company's revenue growth over the last twelve months has been modest at 2.96%, and its gross profit margin is healthy at 23.79%, suggesting a stable financial position.
Two key InvestingPro Tips highlight Alaska Air's promising outlook. Firstly, net income is expected to grow this year, which could be a driving factor for the stock's future performance. Additionally, 8 analysts have revised their earnings upwards for the upcoming period, signaling confidence in the company's financial trajectory. These insights suggest that Alaska Air's fundamentals may support Wolfe Research's upgrade. For those looking to delve deeper, there are over 8 additional InvestingPro Tips available, which can be accessed with the coupon code PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
Investors considering Alaska Air will find these metrics and insights particularly valuable as they assess the company's potential in the context of the broader legacy airline sector's recovery and Alaska Air's strategic positioning.
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