On Wednesday, TD Cowen maintained its Buy rating on shares of Alaska Air Group, Inc. (NYSE: NYSE:ALK), but reduced the price target from $58.00 to $51.00. The adjustment reflects the latest guidance from the company's management and insights into the second half of 2024.
The airline, which is currently involved in cabin retrofit initiatives, may also be preparing for a potential integration with Hawaiian Airlines in 2025, pending deal approval. TD Cowen's analysis suggests that despite near-term cost pressures from the frequent flyer agreement (FA) and increased maintenance expenses, Alaska Air is still the best positioned domestic carrier.
The new price target is based on a 9.9 times multiple of the estimated earnings per share (EPS) for 2025 and a 4.4 times multiple of the 2025 estimated enterprise value to EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs). These financial metrics are standard for evaluating a company's performance and potential growth.
Alaska Air's near-term cost per available seat mile excluding fuel (CASMex) is expected to be impacted by the aforementioned financial commitments. Despite these pressures, the firm's outlook on the airline remains optimistic.
Investors and stakeholders of Alaska Air will be watching closely as the company navigates these developments in the coming months. The airline's strategic moves and financial performance will be crucial for maintaining its leading position in the domestic aviation market.
In other recent news, airlines are facing challenges despite the surge in summer travel. The expected robust earnings have not materialized, with companies such as American, Southwest, United, Delta, Alaska Airlines, and Ryanair (LON:0RYA) reporting less than stellar quarterly results.
This is due to an oversupply of seats leading to fare discounts and increased operating costs. In light of these developments, Susquehanna has maintained a neutral rating on Alaska Air but lowered the price target to $41.00, citing a challenging operating environment.
Meanwhile, the U.S. Treasury Department has raised $556.7 million from auctioning warrants in 11 major U.S. airlines, originally issued as part of COVID-19 relief efforts. American Airlines (NASDAQ:AAL) topped the list of recipients with $12.6 billion in government aid, followed by Delta with $11.9 billion, United Airlines with $10.9 billion, and Southwest Airlines (NYSE:LUV) with $7.2 billion.
Alaska Airlines has announced significant leadership changes, promoting two executives and appointing a new president for its subsidiary, McGee Air Services. Wolfe Research has upgraded Alaska Air's stock from Peer Perform to Outperform, citing favorable earnings potential and an attractive valuation. The firm set a new price target of $55.00 for the airline.
InvestingPro Insights
As TD Cowen maintains its Buy rating on Alaska Air Group, Inc. (NYSE: ALK) with an updated price target, investors might find additional context from InvestingPro data and tips valuable. Alaska Air's market capitalization stands at $4.81 billion, reflecting its significant presence in the industry.
The company's adjusted P/E ratio as of the last twelve months leading into Q2 2024 is an attractive 10.04, suggesting potential value relative to its earnings growth. Additionally, the PEG ratio during the same period is 0.51, which may indicate that the stock is undervalued based on its earnings growth projections.
One of the InvestingPro Tips highlights that analysts are expecting net income growth this year for Alaska Air, aligning with the positive outlook from TD Cowen. Another pertinent tip is the company's low P/E ratio relative to near-term earnings growth, which could be a compelling point for investors considering the stock's value proposition.
For those seeking further analysis, InvestingPro offers additional tips on Alaska Air; using the coupon code PRONEWS24 can provide up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, offering a more comprehensive investment toolkit.
It is worth noting that while some analysts have revised their earnings expectations downwards for the upcoming period, Alaska Air remains profitable over the last twelve months, and it does not pay a dividend, which may appeal to growth-focused investors. For a deeper dive into Alaska Air's financials and future prospects, interested parties are encouraged to explore the full suite of tips available on InvestingPro.
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