Southwest Airlines Stock Has Lost More Than 50% Since 2017- Here’s Why

-0.44%
Downside
39.22
Market
39.05
Trefis
LUV: Southwest Airlines logo
LUV
Southwest Airlines

Southwest Airlines Co (NYSE: LUV) stock price lost more than 50% from $65 in 2017 end to around $31 currently, primarily due to unfavorable changes in its P/S multiple. During this period, the company’s sales have remained roughly flat and there was a marginal drop in the outstanding share count. Additionally, over the same period, the S&P 500 returned around 35%, meaning that Southwest stock has strongly underperformed the index since 2017-end.

In our interactive dashboard, Why Southwest Airlines Stock Moved: LUV Stock Has Lost 52% Since 2017, we break down the factors behind this move.

(A) LUV’s Total Revenue has remained flat around $21 billion, the same level it was at in 2017

  • LUV’s total revenue initially rose from $21.1 billion in FY 2017 to $22.4 billion in FY 2019, but dropped sharply to $9 billion in FY 2020.
  • Revenues have strongly recovered since, jumping to $15.8 billion in FY ’21, and now stand much higher at $21.2 billion on an LTM basis, still at the same level as FY ’17.
  • One of the major airlines of the United States, almost 90% of Southwest’s sales came from the Passenger segment as of FY ’21, standing at around $14 billion.
  • Freight and Other sales brought in the remaining 10% of sales in FY ’21.
  • For additional details about LUV’s revenues and comparison to peers, see Southwest Airlines (LUV) Revenue Comparison
Relevant Articles
  1. Can Southwest Airlines Stock Lead A Bull Market Rally?
  2. Will Southwest Airlines Stock Gain Momentum In The Near-Term?
  3. Why Southwest Airlines Stock Remains A Favorable Bet
  4. Southwest Airlines Stock, Time To Buy?
  5. Southwest Airlines Stock Poised For Strong Gains?
  6. Is There A Better Pick Over Southwest Airlines Stock Ahead Of Earnings?

(B) Revenue per share (RPS) increased 2.1% from $35.15 in 2017 to $35.90 currently

  • LUV’s revenue rose marginally from $21.1 billion in 2017 to $22.2 billion currently, while the outstanding share count dropped from 601.6 million in 2017 to 589.1 million currently.
  • Due to this, RPS has risen from $35.15 in FY ’17 to $35.90 currently.

(C) Price-To-Sales (P/S) multiple for LUV rose strongly from 1.8x in 2017 to 3x by 2020 end, but has pulled back to 0.9x currently, even lower than its 2017 level

  • LUV’s P/S multiple rose to around 3x by late 2020, on the back of rising investor expectations surrounding increased demand for the company’s services.
  • However, due to the current geopolitical tensions and increased economic uncertainty weighing on the broader markets, the P/S multiple has pulled back, currently standing at around 0.9x.
  • For additional details about the company stock returns, and comparison to peers, see Southwest Airlines (LUV) Stock Return Comparison.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Sep 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 LUV Return -15% -28% -38%
 S&P 500 Return -9% -24% 62%
 Trefis Multi-Strategy Portfolio -11% -25% 198%

[1] Month-to-date and year-to-date as of 9/30/2022
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market Beating Portfolios
See all Trefis Price Estimates