Originally Posted by
Gman
Dream over for Southwest?
Prudential Equity Group downgraded the stock, saying the company's business model "does not appear to be working anymore."
Foremost among Southwest's problems is over-expansion: the airline continues to swell its fleet at the rate of about 35 planes per year, even though it is losing money on many of its recently added routes. McAdoo added that Southwest lacks direction, and lowered his target price from $22 to $16, and dropped second quarter estimates to 26 cents from 41 cents as well. "Lacking some new direction, we believe LUV shares are going nowhere," McAdoo says.
What is going on? Has reality set in?
Well, let's see....SWA continues to make a profit, even though the cost of their hedged fuel went up 83% over the past year. And as you expand, that's more planes and more fuel...
What I like to see is the company's "long range" market development philosophy. Some markets may not be big money makers right now, but as the airline continues with it's methodical, pre-planned expansion, with competitive costs per seat mile traveled, I think the airlines future is bright. Personally, I think LUV stock is at a very reasonable price right now, and if I had to own an airline stock, it would be on my short list.
This analysts opinion is a typical short-term, instant gratification one, typical of today's MTV generation.