Southwest Airways may accumulate greater than 50% as soon as a vaccine turns into obtainable, the vendor says
Jefferies is getting optimistic about a name in the airline space.
The company began coverage of Southwest Tuesday with a buy rating in a split call that named Delta and United as holds and American as sell. Analysts gave Southwest a target price of $ 55 and said the airline is best positioned to benefit from a return to domestic travel to the US.
Todd Gordon, Founder of TradingAnalysis.com, is also positive about Southwest but isn't ready to buy.
"I would try cautiously to add Southwest to the portfolio," Gordon told CNBC's "Trading Nation" on Tuesday. "When they went into the pandemic, they were better equipped – they had less debt, less spending, and they focused on domestic travel."
The charts also support more upward moves, according to Gordon. Based on technical analysis, he said the stock could rise to break $ 55 and then potentially break above $ 70 if a Covid-19 vaccine becomes widely available. A move above USD 70 means an upward move of more than 50% and would mark a new high for the first time since December 2017.
Mark Tepper, president of Strategic Wealth Partners, also sees Southwest as one of the best positioned airlines as air traffic is slowly returning to normal. However, he also warns to be careful when to get in.
"It's still a little early. I would wait a little longer," said Tepper in the same segment "Trading Nation". "Domestic travel over international travel and leisure over business travel will be at the core for the next few months at least. If you look at the Southwest, they have the highest percentage of seat miles coming from domestic flights, and they're also more inclined towards leisure over business. "
The question, however, is whether investors have already exhausted this opportunity.
"Much of that is already priced in as Southwest outperforms the JETS ETF by 18% this year," said Tepper.
The Southwest is up 92% in the past six months, while the JETS airline's ETF is up 74%.
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