Southwest Airlines (NYSE LUV) is the leading US airline in 2025.
The airline’s profit dropped by 42% in the first nine-month period of the year. LUV’s shares have risen more than 70 percent since their low of the year in late April.
Southwest Airlines has outperformed even its largest peers including Delta Airlines, United Airlines, in 2025, showing that it is riding an idiosyncratic wave – and not a sector-wide trend.
All of that has passed. The more pressing question, however, is whether LUV can replicate its exceptional performance over the next year. Find out now!
Why has the stock of Southwest Airlines soared in 2025?
Southwest Airlines stock prices have risen this year, but less because of the general demand trend and more due to investor confidence.
In her most recent research note, Raymond James senior analyst Savanthi Sth said:
It’s the initiative, and not demand that’s driving LUV’s stock. If it was the latter, it would be seen in all airline stocks.
Dallas-based air carrier abandons its decades-old policy of open seating in favor of assigned seats, with premium legroom available at a cost. Experts believe this will result in billions more in earnings before tax over the next several years.
Southwest Airlines is signaling its shift to revenue diversification by introducing new fare categories and adopting stricter baggage policy. This will mirror the larger competitors, but still maintain their brand identity.
Are LUV Shares already priced for the potential upside?
Barclays believes Southwest Airlines is not yet out of steam, despite a huge rally in its shares since April.
In December of last year, Brandon Oglenski, the analyst, upgraded its airline shares, stating that its earnings would be over $4.00 next fiscal and will exceed $6.00 in fiscal 2027.
Bob Jordan, chief executive of the company, also expressed optimism during a recent CNBC Interview, saying that “the bookings we are seeing reflect the case for assigning seating and providing extra legroom.”
The valuation of LUV remains an important red flag heading into 2019.
It’s currently trading for about 46x its forward earnings. This is a multiple that dwarfs not only the rivals, but also the ones of Nvidia.
Southwest Airlines’ forecast for $1.0 billion of incremental earnings before taxes in 2026 is a bullish sign. However, lingering risk factors such as tariffs, budgetary pressures from the government, and volatility in demand could dampen near-term performance.
Wall Street’s recommendations for playing Southwest Airlines
LUV shares pay out a current dividend yield of 1.73 %, making them more appealing to income-oriented investors.
Wall Street recommends that Southwest Airlines be sold at the current level, since most of its upside from the overhaul has already been priced in.
Analysts have given the stock a “hold” consensus rating. The mean target is $38, which indicates a potential “downside”, of approximately 8.0%, from this point.
Why Southwest Airlines became the largest US airline in 2025? This post may change as new information unfolds
This site is for entertainment only. Click here to read more
