Southwest Airlines Co. LUV
Southwest's stock has pulled back to $39.64 from the $44.87 level cited in the prior assessment, pushing RSI to 30.4 (oversold) and leaving the shares at a 35% discount to the peer-median PE (23.9x vs 37.0x) and a 46% discount on EV/EBITDA (8.5x vs 15.7x). FY2025 operating income improved to $428M with total debt cut to $6.0B from $9.2B in FY2023, and smart money flows turned positive in Q2 2026 (SM score 0.13, up from -0.08 in Q1).
Yet a 1.5% operating margin, -$831M free cash flow, and a bearish technical posture — trading below both the 50-day ($46.54) and 200-day ($42.92) moving averages — keep the call at hold pending evidence that margin expansion and cash-flow restoration are materializing.
What could go wrong
- Fuel cost shock. The ongoing Iran war has sustained elevated jet fuel prices; any escalation could compress the already-thin 1.5% operating margin further.
- Persistent negative FCF. FY2025 free cash flow was -$831M on $2.67B in capex; continued capital intensity without margin recovery could strain the balance sheet.
- Weak revenue growth. FY2025 revenue growth of just 2.1% suggests limited pricing power against larger network carriers.
- Technical breakdown. Stock trades below both key moving averages with a bearish MACD histogram; failure to reclaim the 200-day MA could signal further downside.
What would change my mind
Where this comes from: technicals · technicals · prior_verdict · peer_relative. Orin's read on LUV; not advice.
Twelve months actual closes to 2026-09-24 · actual filings
50-day average 200-day average · volume below
On file
All LUV filingsLargest holders · 13F Q2 2026
Money flow| Filer | Position | Of fund |
|---|---|---|
| Franklin Resources | $2.4B | 0.5% of fund |
| Vanguard Capital Management | $1.6B | 0.0% of fund |
| State Street | $1.5B | 0.0% of fund |
| Elliott Investment Management L.P | $1.2B | 5.5% of fund |
| Vanguard Portfolio Management | $1.2B | 0.1% of fund |
| Price T Rowe Associates /Md/ | $715.0M | 0.1% of fund |
84 filers · quarter ended Q2 2026 · positions, not flows
Insiders, last 24 months: 72 Form 4 filings, net −$3.5M. Of the 50 on hand, 4 were open-market purchases and 2 sales— the rest are grants, option exercises and tax withholding.
Ask Orin about LUV
Orin answers questions about LUV from its filings, transcripts and numbers — with the source behind every claim. Your own desk starts with 3 free days, card required.
Start 3 free days →Where it trades
| Metric | Now | Own median | Sector |
|---|---|---|---|
| P/E | 25.0× | 37.0× | 44.5× |
| EV/EBITDA | 8.8× | 8.4× | — |
| P/S | 0.68× | 0.80× | — |
| P/B | 2.9× | 1.9× | — |
Its P/E sits below all 5 of the last 5 years (−1.69σ from its own mean).
What Wall Street published
$51
$36 – $65 · +22% against today's price
- 19 buy or overweight
- 22 hold
- 4 underweight or sell
The analysts’ consensus and their own ratings, not Orin’s. A target is a twelve-month opinion published by the firm that wrote it.
Against the companies it is compared to
| Company | Market cap | P/E | EV/EBITDA | Gross | Net | ROE |
|---|---|---|---|---|---|---|
| LUVSouthwest Airlines Co. | $20B | 25.0× | 8.8× | 61.0% | 2.8% | 11% |
| JBHTJ.B. Hunt Transport Services, Inc. | $22B | 32.5× | 13.8× | 16.3% | 5.3% | 19% |
| ULSUL Solutions Inc. | $13B | 26.2× | 13.6× | 50.2% | 16.0% | 38% |
| WWDWoodward, Inc. | $19B | 35.2× | 23.7× | 29.5% | 13.2% | 22% |
The median is of the 3 peers listed above and nothing else — check it against the column. This company trades 23.1% below it. The peer set is the vendor’s, so a company can appear here that a person would not have chosen.
What it has traded at
What its sector has traded at
Two scales, drawn separately on purpose: a sector median and one company’s multiple are not the same number and putting them on one axis invites a comparison neither series supports.
Discounted cash flow
| Model | Fair value | Against | Computed |
|---|---|---|---|
| Standard DCF | $-7 | $41.31 · −117% | 2026-06-10 |
| Levered DCF | $-4 | $41.31 · −110% | 2026-06-10 |
The vendor’s intrinsic-value models. Treat them as a low-growth anchor — for a fast grower the market routinely pays well above a DCF. These were computed against the price in the “against” column, not today’s.
Every estimate on one scale
The vertical rule is the current price. Ranges and point estimates are the backend’s, published as they were calculated; an arrow means the estimate sits beyond this scale, and its number is on the right.