Shareholders of This Airline Should Brace for Turbulence Amid Worker Shortage

In the wake of the Covid-19 pandemic, airlines have struggled, but have shown signs of recovery in 2021. Similarly, investors in this airline’s stock have been subjected to ups and downs, with little clarity as to…

where the share price might be headed.

The result has been mixed feelings among stockholders and commentators. For instance, InvestorPlace contributor Dana Blankenhorn called Southwest Airlines (NYSE:LUV) “the best airline name you can buy,” but also warned prospective investors about the stock’s volatility.

That’s a fair assessment, and a reasonable concern. And with the holiday season upon us, we might wonder whether Southwest can get travelers to their destinations without hiccups.

Sure, there’s an incoming CEO who’s quite confident about Southwest’s recent bookings numbers. That’s all fine and good, but there are issues which both travelers and shareholders should be aware of now.

A Closer Look at LUV Stock

If LUV stock had been flown by a pilot in 2021, I would fire him immediately — if he managed to land the plane, that is.

Southwest stock has shown no sense of direction whatsoever. Prices soared from $45 to nearly $65 early in the year, only for the company to give up those gains by late October.

Prior to the Covid-19 pandemic, LUV stock was trading slightly below $60.

So $60 could prove to be a battle line between the buyers and the sellers. The 52-week high of around $65 is likely to also be a zone of contention.

To be honest, LUV stock’s random price action makes it resistant to technical analysis.

Suffice it to say that momentum-oriented traders might choose to buy above $60, while value investors could start accumulating shares at $45.

A Tale of Two CEOs

Not long ago, Southwest Airlines issued its third-quarter 2021 financial results. The numbers were less awful than anticipated, but nothing to write home about:

  • $4.7 billion in revenues, versus the analysts’ consensus estimate of $4.64 billion (compiled by Bloomberg)
  • Adjusted pre-tax income loss of $135 million, which was better than the expected $141 million loss
  • Adjusted earnings loss of 23 cents per share, a relative “beat” compared to Wall Street’s estimate of a 26-cents-per-share loss

Note that the $4.7 billion in quarterly revenues, which might sound impressive, was still 17% below…

 

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