Alaska Air Group, Inc.
Goldman Sachs analyst Catherine O'Brien indicates that there could be potential upside to the company's 2027 EPS target, taking into account factors such as the recently announced $1 billion share repurchase authorization, improvements in the industry environment, the full recovery of Hawaiian's revenue, the economic benefits from a new joint co-brand credit card deal, and potential solutions to mitigate the current volatility in West Coast jet fuel crack spreads.
The analyst notes that the company plans to transition to a single loyalty program in the second half of 2025.
Per O'Brien, a new agreement is expected to follow this transition, likely before the current contracts expire, based on industry practices of renegotiating ahead of expiration.
The analyst writes that the company's $70 price forecast is based on a normalized EBITDAR valuation methodology, applying a 3.1x EV/EBITDAR multiple to a normalized EBITDAR estimate of $3.7 billion.
The analyst highlights key risks, including potential integration challenges from the recent merger with Hawaiian, higher-than-expected costs from open labor agreements, and possible future delivery disruptions from Boeing Company.
The analyst estimates the company's FY24 revenues of $11.711 billion. The analyst projects FY25 revenues of $14.734 billion.
Price Action: ALK shares are trading lower by 0.05% to $64.06 at last check Thursday.
