Southwest Airlines (NYSE: LUV) stock will be closely watched as reports of Elliott Management acquiring a $2 billion position in the airline have surfaced. Elliott Management is known for pushing for management changes in companies it invests in. Southwest has seen its stock underperform this year, with a 5% decrease, while competitors like Delta Air (NYSE:DAL) and United Airlines (NASDAQ:UAL) have seen their stock prices rise by over 25%.
The issues surrounding Boeing’s production of 737 MAX aircraft have affected Southwest Airlines, leading to a decrease in expected aircraft deliveries this year from 79 to 20. Additionally, the airline has decided to shut down operations at four airports, further impacting its network capacity expansion. These challenges have negatively impacted Southwest’s stock performance in the short term, with a 35% decline from early 2021 to now, underperforming the S&P 500 by 40% over the same period.
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Given the current macroeconomic uncertainties such as high oil prices and elevated interest rates, Southwest Airlines could potentially face further underperformance compared to the S&P 500 in the next 12 months. From a valuation standpoint, LUV stock appears to have limited growth potential, with an estimated valuation of $31 per share compared to its current market price of around $28. However, if Elliott Management is successful in influencing strategic changes at the company, there is potential for long-term growth in Southwest Airlines’ stock price.
Investors should keep an eye on developments at Southwest Airlines following Elliott Management’s stake acquisition, as any changes in management or strategy could impact the company’s future growth trajectory. Despite recent challenges, there is optimism that the airline may see a recovery if the right steps are taken to address its operational and performance issues. The market will be closely watching how Southwest Airlines navigates through its current challenges and whether it can regain its position as a strong performer in the airline industry.
