Southwest Airlines Price Target Cut on ‘Soft’ Economy Class Outlook

Southwest Airlines' stock (NYSE: LUV) has seen it's price target slashed after a turbulent start to 2025 that has seen the stock shed 21.5% YTD. The stock price is trading up 1.22% in this morning's pre-market, despite a significant downside revision by Citi analyst Stephen Trent. The firm downgraded its price target on Southwest from $30 to $23, adding the stock to it's Focus List, all while maintaining a Sell rating on the shares.

Factors contributing to Citi's constrained outlook on Southwest pertain to the performance of the U.S. economy class service—identified as an area that “looks a little soft” in contrast to the airline's other revenue streams. Citi analysts reference tariff uncertainties, positing that they could be influencing discretionary spending, notably among less affluent consumers. Additionally, Southwest's aspirations to expand premium revenue are seen as risky due to potential clashes with network airline competition, which could introduce further downside risk to the carrier's strategies.

Southwest Airlines, headquartered in Dallas, Texas, operates as a passenger airline primarily within the United States. Their service portfolio extends to regions including Mexico, Jamaica, and several other near-international destinations. Alongside its transportation services, Southwest offers technological platforms that cater to various customer travel needs, such as online booking tools and a customer loyalty program. With a market cap around $15.03 billion and operational segments spanning air transportation and digital services, the company is a significant stakeholder in the industrial sector, particularly airlines.

Southwest Airlines holds a trailing P/E ratio of around 34.46, a forward P/E ratio of roughly 16.47, and extends a dividend yield of 2.75%.

The adjustment by Citi on Southwest's price target indicates a cautious stance on part of the firm, recognising potential challenges against broader industry trends. Nevertheless, the minor price hike in today's trading suggests that market reactions are measuring the balance of Southwest's business potential , and shifting market dynamics, against the outlined risks.