UBS cuts Alaska Air stock price target to $75, maintains buy rating

On Thursday, UBS analyst Thomas Wadewitz revised the price target for Alaska Air Group Inc (NYSE:ALK), reducing it to $75 from the previous target of $87. Despite the downward adjustment, Wadewitz has kept a "Buy" rating on the airline’s shares. The decision comes in response to recent industry presentations and comments that indicate a trend of weaker first-quarter performance, with ongoing consumer softness posing challenges beyond the initial quarter. According to InvestingPro data, ALK currently trades at $53.26, with analyst targets ranging from $72 to $110, suggesting significant upside potential despite recent challenges. The stock has shown mixed performance, with a -16.42% YTD return but a strong 35.23% gain over the past six months.

Wadewitz’s analysis led to a reduction in earnings per share (EPS) forecasts for several airlines, including United Airlines Holdings Inc (NASDAQ:UAL), Spirit Airlines (OTC:SAVEQ) Inc (NYSE:ULCC), Allegiant Travel Company (NASDAQ:ALGT), and JetBlue Airways Corporation (NASDAQ:JBLU). Previously, adjustments had already been made to the EPS estimates for Delta Air Lines, Inc. (NYSE:DAL) and American Airlines Group Inc (NASDAQ:AAL). The new EPS estimates for 2025 show a decrease of 12% for UAL, 9% for ALK, 30% for ULCC, and a significant 34% for ALGT. InvestingPro analysis reveals that ALK maintains a relatively attractive P/E ratio of 16.86, with projected revenue growth of 26% for FY2025, suggesting potential resilience despite the EPS forecast reduction. Five analysts have recently revised their earnings expectations downward for the upcoming period.

The lowered EPS forecasts reflect an anticipated softer demand and a 2 to 3 percentage point worse Revenue per Available Seat Mile (RASM) performance than initially projected. Alongside the price target revision for Alaska Air, Wadewitz also reduced the price targets for other airlines, setting UAL’s new target at $107 (down from $140), ALGT’s at $61 (down from $93), and ULCC’s at $7 (down from $10).

In addition to the price target adjustments, UBS has changed its stance on Southwest Airlines Co (NYSE:LUV), upgrading the stock to "Neutral" from "Sell." This shift suggests a more moderate outlook for the Dallas-based carrier compared to the previous bearish view. The changes in UBS’s airline sector ratings and price targets reflect a recalibration of expectations in light of the current industry trends and economic factors affecting consumer behavior and airline demand. For deeper insights into ALK’s valuation and future prospects, InvestingPro subscribers can access comprehensive analysis through the Pro Research Report, which provides detailed metrics, peer comparisons, and expert analysis of the company’s financial health and market position.

In other recent news, Alaska Air Group Inc. reported impressive financial results for the fourth quarter of 2024, with earnings per share reaching $0.97, significantly exceeding the forecast of $0.43. The company’s revenue also surpassed expectations, totaling $3.53 billion compared to the anticipated $3.41 billion. This strong performance highlights Alaska Air’s robust operational efficiency and successful market expansion efforts. In addition to financial achievements, Alaska Airlines announced the appointment of Eric Edge as the new Vice President of Brand & Marketing, a move aimed at enhancing the marketing strategy for both Alaska Airlines and Hawaiian Airlines. Edge’s role will focus on promoting the airlines’ unified loyalty program and expanding their global network. The appointment is part of the company’s strategy to solidify its position as Hawai’i’s preferred carrier. These developments reflect Alaska Airlines’ ongoing efforts to enhance customer experiences and drive revenue growth.

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