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On Monday, UBS analysts adjusted their stance on Alaska Air (NYSE: NYSE:ALK), downgrading the airline’s stock from Buy to Neutral and significantly reducing the price target from $75.00 to $54.00. The stock, currently trading at $44.45, has declined nearly 10% in the past week and 31% year-to-date. The shift in rating was attributed to concerns over an anticipated downturn in the economy and the increasing likelihood of a recession. According to InvestingPro analysis, the stock appears undervalued compared to its Fair Value.
The UBS analyst expressed concerns that Alaska Air, while not having issued a formal update on its March business conditions, is likely experiencing similar challenges as other airlines, who have noted a decline in domestic leisure and a slowdown in corporate travel growth since February/March. This observation was further supported by Delta Air Lines (NYSE:DAL)’ recent revision of its first-quarter revenue growth expectations, which saw a decrease of approximately 4 percentage points. With earnings scheduled for April 17, InvestingPro data shows nine analysts have recently revised their earnings expectations downward.
The downgrade also took into account broader economic issues that could impact Alaska Air’s revenue streams. The analyst pointed out that the softer U.S. economy and tariff challenges might put pressure on the airline’s various customer segments, including domestic main cabin, premium, and international travel, throughout the second quarter and the second half of 2025.
Despite Alaska Air’s growth strategy being supported by its acquisition of Hawaiian Airlines, UBS analysts are now skeptical about the realization of revenue synergies from this merger. They anticipate that the expected benefits may be delayed due to the weaker macroeconomic environment.
In other recent news, Alaska Airlines reported impressive financial results for the fourth quarter of 2024, with earnings per share (EPS) 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. In a move to enhance its pilot training programs, Alaska Airlines has partnered with Loft Dynamics to develop a Boeing (NYSE:BA) 737 VR simulator, utilizing advanced virtual reality technology. The investment highlights the airline’s commitment to innovation and safety in aviation.
Additionally, UBS analyst Thomas Wadewitz revised the price target for Alaska Air Group Inc., lowering it to $75 from the previous $87, while maintaining a "Buy" rating, citing weaker first-quarter performance trends. The analyst also noted a reduction in earnings per share forecasts for the airline sector, including a 9% decrease for Alaska Air. In a strategic appointment, Alaska Airlines named Eric Edge as the new Vice President of Brand & Marketing to oversee marketing strategies for both Alaska Airlines and Hawaiian Airlines, aiming to strengthen their market position and customer experiences.
These developments reflect Alaska Airlines’ ongoing efforts to innovate and adapt in a challenging industry environment.
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