Would You Still Hold Southwest Airlines Stock If It Fell Another 30%?
Southwest Airlines (LUV) stock is down 6.9% in a day. The recent slide reflects renewed concerns around surging oil prices and its business model overhaul, but sharp drops like this often raise a tougher question: is the weakness temporary, or a sign of deeper cracks in the story?
Before judging its downturn reslience, let’s look at where Southwest Airlines stands today.
- Size: Southwest Airlines is a $27 Bil company with $28 Bil in revenue currently trading at $43.90.
- Fundamentals: Last 12 month revenue growth of 2.1% and operating margin of 1.5%.
- Liquidity: Has Debt to Equity ratio of 0.22 and Cash to Assets ratio of 0.11
- Valuation: Southwest Airlines stock is currently trading at P/E multiple of 60.5 and P/EBIT multiple of 39.4
- Has returned (median) 41.6% within a year following sharp dips since 2010. See LUV Dip Buy Analysis.
These metrics point to a Weak operational performance, alongside High valuation – making the stock Unattractive. For details, see Buy or Sell LUV Stock
That brings us to the key consideration for investors worried about this fall: how resilient is LUV stock if markets turn south? This is where our downturn resilience framework comes in. Suppose LUV stock falls another 20-30% to $31 – can investors comfortably hold on? Turns out, the stock has fared much worse than the S&P 500 index during various economic downturns, based on (a) how much the stock fell and, (b) how quickly it recovered. Below, we dive deeper into each such downturn.
2022 Inflation Shock
- LUV stock fell 65.3% from a high of $64.10 on 6 April 2021 to $22.23 on 31 October 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $54.80 on 18 February 2026 , and currently trades at $43.90
| LUV | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -65.3% | -25.4% |
| Time to Full Recovery | Not Fully Recovered | 464 days |
2020 Covid Pandemic
- LUV stock fell 59.2% from a high of $58.54 on 13 February 2020 to $23.87 on 15 May 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 24 February 2021
| LUV | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -59.2% | -33.9% |
| Time to Full Recovery | 285 days | 148 days |
2018 Correction
- LUV stock fell 33.0% from a high of $66.29 on 2 January 2018 to $44.40 on 24 December 2018 vs. a peak-to-trough decline of 19.8% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
| LUV | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -33.0% | -19.8% |
| Time to Full Recovery | Not Fully Recovered | 120 days |
2008 Global Financial Crisis
- LUV stock fell 69.8% from a high of $16.60 on 8 August 2007 to $5.01 on 5 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 24 October 2013
| LUV | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -69.8% | -56.8% |
| Time to Full Recovery | 1,694 days | 1,480 days |
Feeling jittery about LUV stock? Consider portfolio approach.
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