It looks like the end of an era for Southwest Airlines (LUV)... Last Thursday, the airline announced it would be changing its seating policy.
The Power Gauge Knows Southwest Needs to Make Changes
By Vic Lederman, editorial director, Chaikin Analytics
It looks like the end of an era for Southwest Airlines (LUV)...
Last Thursday, the airline announced it would be changing its seating policy.
Southwest plans to switch to an assigned seating system. That means it will be able to charge more for premium seats.
Assigned seating is common in the airline industry. But as you surely know, Southwest has been an outlier when it comes to seating...
Its "open seat" boarding system has been a key feature since the 1970s. In fact, the company used a "first come, first served" boarding process at the gate until 2007.
Without question, it's an unconventional approach. But Southwest founder Herb Kelleher liked it that way. As he once said...
Conventional wisdom put a hell of a lot of airlines out of business.
But today, Southwest's stock is struggling. And it looks like the company is finally giving in to shareholder and customer pressure for a more conventional approach.
If you're a Power Gauge user, Southwest's struggles aren't surprising. After all, the company has held a "bearish" or "neutral" rating for most of the past five years. So today, let's take a closer look at whether the Power Gauge sees a turnaround in the works...
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Folks, there's no question that passenger airlines have struggled since the 2020 pandemic.
We all remember the lockdowns amid the depths of the pandemic. With them in place across the globe, passenger travel collapsed. And even the pent-up travel demand after the pandemic receded hasn't been enough to bring the airlines back into stronger territory.
In fact, the Power Gauge currently rates passenger airlines as a weak industry group.
So we know that the whole group is going through a rough patch. But it's particularly bad for the budget carriers...
Shares of Frontier (ULCC) are down nearly 80% since the company went public in 2021. And over the past five years, Spirit Airlines (SAVE) is down a staggering 93%.
Put simply, Southwest isn't the odd man out here. Sure, its stock is "only" down about 48% over the past five years. But a decline like that is still painful for investors. Take a look at the chart below...
As you can see, Southwest's stock suffered a massive collapse in 2020. (Of course, that was shared across the entire industry.)
You can also see the stock's sharp recovery that peaked in 2021. But it has been downhill since then.
The Power Gauge followed it along the way. Since 2021, Southwest has held a "bearish" or "neutral" rating in our system nearly the entire time. Right now, the company gets a "bearish" grade.
That's exactly what we want to see in a situation like this. It's a warning to investors. And it makes the decision-making process clear...
As Chaikin Analytics founder Marc Chaikin likes to say, "Bottom-fishing is the most dangerous sport in investing." Despite that, investors are often tempted to buy into struggling industries... hoping for a rebound.
With the Power Gauge, we have an easy answer. The passenger airlines industry group currently earns a weak rating. And we see that airlines are struggling in general.
Digging deeper, we see that the budget carriers have it the worst right now. And their stocks have seen massive declines over the past five years.
Knowing that, it's no surprise that they're looking to make big changes. Southwest dropping its historic seating policy is likely just the start.
But that doesn't mean it's time to buy yet. The Power Gauge is still flashing a major warning sign for Southwest.
Good investing,
Vic Lederman
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.28%
7
19
4
S&P 500
+1.57%
139
299
58
Nasdaq
+2.97%
15
62
22
Small Caps
+0.64%
725
997
249
Bonds
+1.02%
Information Technology
+4.24%
14
47
6
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are Bullish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Industrials
+3.79%
Discretionary
+3.41%
Communication
+3.21%
Energy
+3.15%
Materials
+2.82%
Financial
+2.72%
Utilities
+2.42%
Real Estate
+2.26%
Information Technology
+1.35%
Staples
+0.08%
Health Care
-0.16%
* * * *
Industry Focus
Transportation Services
4
26
14
Over the past 6 months, the Transportation subsector (XTN) has underperformed the S&P 500 by -10.79%. Its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #20 of 21 subsectors.
Indicative Stocks
SAVE
Spirit Airlines, Inc
FWRD
Forward Air Corporat
HTZ
Hertz Global Holding
* * * *
Top Movers
Gainers
VST
+14.81%
MTCH
+13.21%
NVDA
+12.84%
CEG
+12.51%
AVGO
+11.96%
Losers
HUM
-10.61%
VRSK
-8.48%
BG
-8.14%
CDW
-6.18%
MAR
-4.8%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
TRGP, HWM, CI, CMI, PNW, REGN, EXC, ETR
ALL, VTR, VRTX, PRU, MTD, MRNA, MPWR, HII, ES, ANET
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