Southwest Airlines Co.
Orin's own judgment of how firmly the evidence points one way — not the chance the price goes up.
Southwest's commercial transformation is producing real top-line acceleration — Q2 2026 revenue jumped 16.4% YoY to $8.43B with a blowout $0.94 EPS versus $0.51 consensus — and total debt was cut from $8.06B in FY2024 to $5.98B in FY2025.
However, the stock trades at a 97% PE premium to the peer median (23.4x vs 11.9x) despite a razor-thin 1.5% FY2025 operating margin and negative $831M free cash flow, and technically the shares have broken below both the 50-day ($40.99) and 200-day ($43.49) moving averages with RSI at 38.4 and a negative MACD histogram. With Q3 2026 earnings imminent and the loyalty-program overhaul only taking effect January 2027, the setup is a wait-and-see between improving fundamentals and a technically damaged, richly valued stock.
What could go wrong
- Valuation premium unsustainable. LUV's PE of 23.4x is 97% above the peer median of 11.9x while operating margin is just 1.5%; any earnings miss could trigger a sharp de-rating.
- Persistent negative free cash flow. FY2025 FCF was negative $831M and capex was $2.67B; continued cash burn limits financial flexibility despite debt reduction.
- Fuel and labor cost pressure. Recent analyst commentary ahead of Q3 2026 highlights rising fuel and labor costs that could compress already-thin margins.
- Technical breakdown. Stock at $38.80 is below both MA50 ($40.99) and MA200 ($43.49) with RSI 38.4 and negative MACD histogram, suggesting further downside risk.
What would change my mind
Where this comes from: Q2 2026 results · earnings vs estimates, 22 Jul · FY24 and FY25 fundamentals · peer comparison. Orin's read on LUV; not advice.
How has the share price moved?
Up 34.7% over twelve months, from $32.25 on 27 Oct 2025 to $43.44 at the Tue 27 Oct 2026 close. Its highest close in that time was $54.80 on 18 Feb 2026; the last close is 20.7% below it.
- Green line: the closing price each trading day.
- Grey line: the average closing price over the last 50 trading days.
- Dashed amber line: the same over the last 200 trading days — a slower, smoother line.
- Bars along the bottom: shares traded each day — green when it closed higher than the day before, rose when lower (the most, 34.5M, on 29 Jan 2026).
- Flags: the company's filings, on the day they were made (a 10-Q is the quarterly report and a 10-K the annual report; an 8-K reports a major event).
On file
All LUV filingsLargest holders · 13F Q2 2026
Money flow| Filer | Position | Of fund |
|---|---|---|
| Franklin Resources | $2.4B | 0.5% |
| Vanguard Capital Management | $1.6B | 0.0% |
| BlackRock | $1.5B | 0.0% |
| State Street | $1.5B | 0.0% |
| Elliott Investment Management | $1.2B | 5.5% |
| Vanguard Portfolio Management | $1.2B | 0.1% |
| T. Rowe Price Associates | $715.0M | 0.1% |
| Geode Capital Management | $653.9M | 0.0% |
| Ameriprise Financial | $554.0M | 0.1% |
| Goldman Sachs Group | $535.2M | 0.0% |
87 of the 815 filers we track · quarter ended Q2 2026 · positions, not flows
Insiders, last 24 months: 72 Form 4 filings; open-market trades net $407K. 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 →How is it priced, against its own past and its sector?
Priced at 20.6× its last 12 months of profit (Tue 27 Oct close) — lower than in all 5 of its last 5 fiscal years (middle 37.0×); the typical Industrials company on the NYSE is at 33.7×.
| Measure | Now | Its usual | Sector |
|---|---|---|---|
| P/E | 20.6×below usual | 37.0× | 33.7× |
| P/S | 0.67×below usual | 0.80× | — |
| EV/EBITDA | 8.1×near usual | 8.4× | — |
| P/B | 2.9×above usual | 1.9× | — |
- "Its usual" is the middle of its own last 5 fiscal years.
P/E: the share price divided by one year of profit per share — roughly how many years of today's profit the price pays for. A company that loses money has no P/E.
P/S: the company's total market value divided by one year of revenue. Used when there is no profit to measure.
EV/EBITDA: the price of the whole company (its shares plus its debt, minus its cash) divided by one year of operating profit before interest, tax and write-downs.
P/B: the share price divided by the book value per share — what the company owns minus what it owes, as its accounts record it. When book value is tiny, P/B swings wildly and says little.
What do the analysts who cover it publish?
The analysts' average 12-month price target is $51.56 (from $40 to $65) — 19% above the Tue 27 Oct close price. That is their published opinion, not Orin's.
$51.56
$40 – $65 · +19% against the last close
- 8 buy or overweight
- 8 hold
- 2 underweight or sell
Price target: the share price an analyst publishes for about 12 months ahead. It is the opinion of the firm that wrote it; the average is across the firms that cover the company.
Overweight / underweight: analysts' rating words: overweight means the firm expects the stock to do better than the others it covers, underweight worse. Their words, not Orin's.
How is it priced next to the companies it is compared to?
Priced at 20.6× its last 12 months of profit. Only 2 of the 2 companies it is compared to made a profit (DAL 16.2×, UAL 9.6×), so there is no typical P/E.
| Company | Market value | P/E | EV/EBITDA | Gross margin | Net margin | ROE |
|---|---|---|---|---|---|---|
| LUVSouthwest Airlines Co. | $21B | 20.6× | 8.1× | 55.7% | 3.3% | 14% |
| DALDelta Air Lines, Inc. | $54B | 16.2× | 9.3× | 29.9% | 4.6% | 15% |
| UALUnited Airlines Holdings, Inc. | $34B | 9.6× | 7.2× | 65.7% | 5.5% | 22% |
- The list of companies is the data vendor's choice, so it can include a company a person would not have picked.
Market value: the share price times the number of shares — what the whole company is priced at.
P/E: the share price divided by one year of profit per share — roughly how many years of today's profit the price pays for. A company that loses money has no P/E.
EV/EBITDA: the price of the whole company (its shares plus its debt, minus its cash) divided by one year of operating profit before interest, tax and write-downs.
Gross margin: the share of each $1 of sales left after the direct cost of making what was sold.
Net margin: the share of each $1 of sales kept as profit after every cost. Below zero, the company lost money.
ROE: return on equity: one year of profit as a share of the shareholders' money in the business (its book value).
Is it priced high or low compared with its own past?
Priced at 20.6× its last 12 months of profit (Tue 27 Oct close). It has no full fiscal year on file since its history starts, so there is nothing of its own to compare with.
- Now20.6×
P/E: the share price divided by one year of profit per share — roughly how many years of today's profit the price pays for. A company that loses money has no P/E.
Fiscal year (FY): the company's own 12-month accounting year, which need not match the calendar year.
How has its sector been priced?
Industrials companies on the NYSE were priced at a typical 33.7× their yearly profit (Tue 27 Oct close).
- Now33.7×
- Each year is the middle of that calendar year's daily sector P/E; "Now" is the Tue 27 Oct close figure, the same one in the table above.
Sector P/E: the middle P/E of the companies in the same sector on the same stock exchange, as the data vendor works it out each day.
What does a cash-flow model say a share is worth?
It spends more cash than it brings in, so a cash-flow model gives no usable value (both versions come out below zero).
Discounted cash flow: a model's estimate of what the company is worth today, from the cash it is forecast to make in future years. Small changes in the forecast move it a lot, and it says little about a company that loses money.