Southwest shares close lower on Thursday, company revises down first-quarter revenue forecast on coronavirus impact

Southwest Airlines Co (LUV) said earlier this week that it might incur a hit of up to $300 million to its operating revenue during the first quarter due to the coronavirus outbreak.

The company also revised down its quarterly revenue forecast.

Shares of Southwest Airlines closed lower for the eighth time in the past ten trading sessions in New York on Thursday. The stock went down 3.60% ($1.69) to $45.24, after touching an intraday low at $44.20, or a price level not seen since November 14th 2016 ($43.88).

Shares of Southwest Airlines Company have retreated 16.19% so far in 2020 compared with a 6.40% loss for the benchmark index, S&P 500 (SPX).

In 2019, Southwest Airlines Co’s stock went up 16.14%, thus, it again underperformed the S&P 500, which registered a 28.88% gain.

According to Southwest, ticket cancellations have increased significantly and traffic has dropped because of the epidemic, as the death toll has already exceeded 3 000, prompting global airlines to cut flights.

The air carrier said it would reduce international flights by 20% and US flights by 10% in April.

The company also said it expected a $200 million to $300 million hit on its operating revenue as a result of the coronavirus outbreak. In Q1 last year, Southwest reported $5.15 billion in total operating revenue.

Southwest now projects between 2% drop and 1% growth in total revenue per available seat mile during the first quarter. Previously, it had expected between 3.5% and 5.5% growth.

Analyst stock price forecast and recommendation

According to CNN Money, the 16 analysts, offering 12-month forecasts regarding Southwest Airlines’ stock price, have a median target of $56.50, with a high estimate of $60.00 and a low estimate of $48.00. The median estimate represents a 24.89% upside compared to the closing price of $45.24 on March 5th.

The same media also reported that at least 14 out of 19 surveyed investment analysts had rated Southwest Airlines’ stock as “Hold”, while 2 – as “Buy”. On the other hand, 2 analysts had recommended selling the stock.