Jefferies is getting bullish on one name in the airline space.
The ratings agency initiated coverage of Southwest (NYSE:LUV) on Tuesday with a buy rating, in a split call that named Delta (NYSE:DAL) and United (NASDAQ:UAL) as holds and American (NASDAQ:AAL) as a sell. Analysts gave Southwest a $55 price target, saying the airline is best positioned to benefit from a return to domestic U.S. travel.
The charts also support more upside, according to experts. Based on a technical analysis, he said the stock could move up to break through $55 and then possibly break above $70 should a Covid-19 vaccine become widely available. A move above $70 implies more than 50% upside 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 travel slowly returns to normal, but he also urges caution on when to jump in.
"The theme at least over the next few months is domestic over international travel and leisure over business travel, and when you look at Southwest, they’ve got the highest percentage of seat miles coming from domestic flights and they’re also more heavily tilted towards leisure over business."
Southwest has surged 92% in the past six months. Those shares took flight early Wednesday, $1.17, or 2.6%, to $46.83.
