Southwest Airlines Could Triple From Here—Here's How

Key Points

• In the airline industry, a company stands out in its upside potential today, and there is a path for it to potentially triple from today's prices.
• Wall Street analysts agree with this view, as they landed on EPS forecasts that support a higher valuation.
• Markets keep Southwest Airlines on a premium valuation for a reason, and this upside might be it.

Investors typically aren’t as excited about airline stocks as they might be about other stocks in exciting areas like the technology sector of the United States stock market. However, there is one name in the industry that today presents a potential for becoming a three-bagger from where it trades today. There are a few reasons for this one airline to make investors look past the stigma from the industry, ones that Wall Street agrees with.

Now, before investors think that this will be a smooth road ahead, they should keep in mind that the way this airline will potentially triple might bring a bit of turbulence, but once it’s on its way, there will likely be others chasing the stock as it goes higher. The airline that stands out from the pack is Southwest Airlines Co. NYSE: LUV, a name that is known for its profit margins and fuel cost management, which has led it to an advantageous position.

Today, the company is shifting some of its business models through new routes and flight schedules and dropping its previous two free checked bags policy. While bearish traders might see this as a negative for demand and reputation, the fact is that the company is creating new sources of revenue for itself. However, before investors understand how these factors influence Wall Street forecasts, they need to understand one more macro aspect of oil.

The Global Scene Favors Southwest Airlines

While other airlines like Delta Air Lines Inc. NYSE: DAL or United Airlines Holdings Inc. NASDAQ: UAL have a broader reach and market share in the international travel market, they don’t have the nimbleness and availability to hedge fuel costs like Southwest.

In today’s economy, where the manufacturing sector activity in the United States is starting to become the focus for President Trump, a breakout in the space will likely create more demand for oil. The same can be said about China’s manufacturing activity breakouts, meaning the two largest economies in the world are slowly creating tailwinds for the energy sector.

Remove Ads

This is where Southwest Airlines could take the lead, margin-wise, over its competitors. Other factors also favor the airline over its peers.

Southwest Airlines: The Quiet Domestic Leader

Southwest Airlines holds a similar domestic market share to Delta Air Lines and American Airlines Group Inc. NASDAQ: AAL, as judged by the total number of flights per year. Historically, when oil prices are low (like today), these international names fare better, but as investors now know, that might change soon.

That is why Wall Street analysts are comfortable forecasting earnings per share (EPS) for up to $3.27 in the year 2027. Now, while that is nearly triple the 2025 forecast for $1.67, it is the valuation multiples that can deliver the three-bagger status to this stock. Here’s how.

Southwest Airlines trades at a price-to-earnings (P/E) ratio of 44.1x today. If valuations stay at this level in the near future, eventually, markets will have to price in Wall Street’s EPS forecasts at this ratio. Doing the math, a $3.27 EPS forecast valued at 44.1x P/E would send the stock to just over $144 per share.

While this may seem too good to be true today, seasoned investors will remind everyone that the market always overpays for stocks that it believes will outperform its peers and the broader market in the near future. Southwest Airlines trades at a steep premium to the transportation sector’s 12.3x average P/E.

Now, who is better to know about this potential upside than the people who run the company daily? Investors can lean on the fact that, as of March 2025, two Southwest Airlines directors decided to buy Southwest Airlines stock just in time for the first quarter financial results.

If Southwest Airlines' recent past can be any indication of its future financial performance, then these insiders will be very well positioned. The company’s latest quarterly results show a record level of operating revenue, reaching up to $6.9 billion.

On the bottom line, investors can look to the company’s cash flow statements, particularly how Southwest Airlines achieved up to $476 million in operating cash flows, up from $425 million during the same quarter last year. This 12% bump in the year is impressive, considering that the oil markets saw increased volatility during the period, showcasing this airline’s ability to manage its costs well.