CFRA Keeps Hold Opinion on Shares of Alaska Air Group, Inc.

ALK

Recommendation

Recommendation

47

USD

Target Price

Stars Rank

Our 12-month target of $47, up $7, is 10x our 2025 EPS view (up to $4.72 from $4.06, 2024 lifted to $4.01 from $3.43), below ALK’s historical average. We think a discount is merited due to persistent issues with Boeing (BA 170 **), which is causing further delays in new aircraft deliveries (86% of ALK’s future orders are the 737 MAX variety aircraft), which could boost unit costs, in our view. Q1 loss per share (LPS) of -$0.92 vs. LPS of -$0.62, beat consensus by $0.13. Q1 revenue rose 2% Y/Y, while capacity fell 2% Y/Y due to the grounding of ALK’s 737 MAX-9 aircraft. ALK revised its 2024 guide, with EPS expected in range of $3.25-$5.25/share (vs. prior $3-$5/share), and capex in range of $1.2B-$1.3B (vs. prior $1.4B-$1.5B). In Q1, ALK received a second request for information from the DOJ about its acquisition of Hawaiian Airlines (HA 13 NR); however, given that ALK and HA only have 12 overlapping routes, we don’t believe the deal will face the same level of regulatory scrutiny that JBLU and SAVE faced.