Southwest Airlines (LUV) stock jumped more than 7% out of the gate Monday. The upside comes after The Wall Street Journal on Sunday reported that activist investor Elliott Investment Management has built a stake worth nearly $2 billion in the air carrier.
Elliott plans to engage with the management team at Southwest and push for changes to reverse the airline's recent underperformance, the WSJ said.
Southwest has faced a myriad of issues in recent years, including a major operational failure during the 2022 Christmas and New Year holidays that led to the cancellation of nearly 17,000 flights and left more than 2 million travelers stranded. The company was fined $140 million for these failures and had to pay more than $600 million in refunds and reimbursements to travelers, as Kiplinger previously reported.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
More recently, Southwest announced on its first-quarter conference call in April that it was eliminating service in four cities and restructuring several other stations, including reducing flights in Atlanta International Airport and Chicago O'Hare International Airport, to "optimize" its network.
Southwest's stock is down about 6% over the last year, compared with gains of over 26% for Delta Air Lines (DAL) – one of Kiplinger's best stocks to buy – and about 4% for United Airlines (UAL).
Southwest stock has a market capitalization of approximately $17.7 billion at the time of this writing, so Elliott's estimated $2 billion stake would be roughly 11.3% of the company. This makes it one of LUV's largest stakeholders, alongside The Vanguard Group.
Is Southwest stock a buy, sell or hold?
Analysts are on the sidelines when it comes to the underperforming industrial stock. According to S&P Global Market Intelligence, the average analyst target price for LUV stock is $26.96, roughly 10% below current levels. Additionally, the consensus recommendation is Hold.
Financial services firm Argus Research recently downgraded LUV stock to Hold from Buy, citing issues that Elliott may very well be focused on fixing.
"With employee costs high and aircraft deliveries delayed, the road to recovery is likely to take longer than anticipated," wrote Argus Research analyst John Staszak in a May 28 note. "Southwest will also require time to accelerate revenue growth and improve its network."
Related Content
-
Amazon to Display Tariff Charges on Their Product ListingsHow much will tariffs increase Amazon's prices?
-
How Trump's First 100 Days Have Impacted Your PortfolioPresident Trump's first 100 days in office have been busy, with a flurry of executive orders sparking volatility in the stock and bond markets.
-
How Trump's First 100 Days Have Impacted Your Portfolio
President Trump's first 100 days in office have been busy, with a flurry of executive orders sparking volatility in the stock and bond markets.
-
Is It Still Worth It to Gift Savings Bonds?Kiplinger editor explores if it's still a good idea to get savings bonds as gifts for children, looking at their returns and usability.
-
Don't Veer Off Course at the First Sign of a Squall in the MarketsWhen markets go nuts and investor sentiment drops, you can keep your sanity by trusting in and sticking with your long-term plan.
-
How Business Owners Can Prepare for a Terminal DiagnosisThe most important thing is readiness, whether the owner faces a life-changing diagnosis or an employee does.
-
Advisers, Take Note: How 2025 Social Security Changes May Impact Your ClientsWhat financial advisers might need to know to help their clients navigate Social Security in 2025.
-
Stock Market Today: Have We Seen the Bottom for Stocks?Solid first-quarter earnings suggest fundamentals remain solid, and recent price action is encouraging too.
-
Social Security Is Taxable, But There Are WorkaroundsIf you're strategic about your retirement account withdrawals, you can potentially minimize the taxes you'll pay on your Social Security benefits.
-
Serious Medical Diagnosis? Four Financial Steps to TakeA serious medical diagnosis calls for updates of your financial, health care and estate plans as well as open conversations with those who'll fulfill your wishes.
