Southwest shares close lower on Monday, air carrier to sell and lease back 20 aircraft for nearly $815 million

A regulatory filing by Southwest Airlines Co (LUV) from last week showed that the air carrier intended to sell and lease back 20 jets for gross proceeds of nearly $815 million.

The move comes at a time when cash saving is essential for airlines.

The company said that the money raised would be used for general corporate purposes.

Shares of Southwest Airlines closed lower for the fifth time in the past ten trading sessions in New York on Monday. The stock went down 4.08% ($1.11) to $26.09, after touching an intraday low at $25.79, or a price level not seen since May 7th ($24.99).

Shares of Southwest Airlines Company have retreated 51.67% so far in 2020 compared with a 9.30% 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.

Southwest said that the deal involved 10 Boeing 737 MAX 8 jets and 10 Boeing 737-800 aircraft.

In April, rival carrier United Airlines said that it would sell and lease back 22 aircraft to Bank of China Aviation.

The COVID-19 pandemic has caused passenger traffic in the United States to drop 95% since March.

Analyst stock price forecast and recommendation

According to CNN Money, the 17 analysts, offering 12-month forecasts regarding Southwest Airlines’ stock price, have a median target of $37.00, with a high estimate of $50.00 and a low estimate of $29.00. The median estimate represents a 41.82% upside compared to the closing price of $26.09 on May 11th.

The same media also reported that at least 9 out of 19 surveyed investment analysts had rated Southwest Airlines’ stock as “Hold”, while 8 – as “Buy”. On the other hand, 1 analyst had recommended selling the stock.