Alaska Air Intrinsic Value Calculation – Alaska Air Group: Challenging Conditions Ahead But Still A Viable Investment Option
November 29, 2023
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Alaska Air ($NYSE:ALK) Group is a major American airline holding company headquartered in SeaTac, Washington. It operates several airlines, including Alaska Airlines, Horizon Air, and Virgin America. Recent challenges have put the company’s financials under pressure, but investors should still consider it a viable investment option. Alaska Air Group faces a number of short-term obstacles that could put further pressure on its financials. Rising fuel prices, labor costs, and competition from low-cost carriers are among the most pressing issues.
In addition, the company recently announced plans to move its headquarters to Seattle and to absorb Virgin America into its operations, which could create additional short-term expenses. Despite these challenges, Alaska Air Group remains a viable investment option. The company has a strong balance sheet with substantial cash reserves and low debt levels. Alaska Air Group is also well-positioned to capitalize on the growing demand for air travel, particularly in the U.S. and Asia-Pacific regions. Investors should carefully consider the risks associated with investing in the company, but may find it to be an attractive long-term opportunity.
Stock Price
Alaska Air Group, the parent company of Alaska Airlines, is facing some challenging conditions in the coming months. On Monday, ALASKA AIR stock opened at $36.8 but closed at $36.8, down by 1.0% from its prior closing price of 37.2. Analysts point to the company’s strong market position and long-term potential as reasons why investors should consider investing in Alaska Air Group. The company has a reputation for delivering reliable service with a commitment to customer satisfaction, which has enabled it to maintain its competitive edge in the industry.
Additionally, the company is well-positioned to benefit from any recovery in the airline industry due to its extensive network and robust loyalty program. Investors should note that Alaska Air Group is currently undertaking a restructuring plan that is expected to result in cost savings. The company has also implemented safety protocols to protect its employees and customers, which will help shore up its financial performance over the long-term. Furthermore, Alaska Air Group has created a working capital fund to help cushion the blow of any potential disruptions caused by the pandemic. Despite the challenging conditions ahead, analysts believe that Alaska Air Group remains an attractive investment opportunity for investors who are willing to take a long-term view. With its strong business fundamentals, sound financial position, and commitment to safety and customer satisfaction, Alaska Air Group provides an attractive opportunity for those looking to invest in the airline industry. Live Quote…
About the Company
Income Snapshot
Below shows the total revenue, net income and net margin for Alaska Air. More…
| Total Revenues | Net Income | Net Margin |
| 10.35k | 259 | 6.3% |
Cash Flow Snapshot
Below shows the cash from operations, investing and financing for Alaska Air. More…
| Operations | Investing | Financing |
| 1.11k | -1.14k | -17 |
Balance Sheet Snapshot
Below shows the total assets, liabilities and book value per share for Alaska Air. More…
| Total Assets | Total Liabilities | Book Value Per Share |
| 15.16k | 11.07k | 32.17 |
Key Ratios Snapshot
Some of the financial key ratios for Alaska Air are shown below. More…
| 3Y Rev Growth | 3Y Operating Profit Growth | Operating Margin |
| 27.6% | -16.3% | 4.3% |
| FCF Margin | ROE | ROA |
| -5.8% | 6.9% | 1.8% |
Analysis – Alaska Air Intrinsic Value Calculation
At GoodWhale, we recently conducted an analysis of ALASKA AIR‘s wellbeing. Our proprietary Valuation Line concluded that the fair value of ALASKA AIR shares is around $85.0. However, at this time, ALASKA AIR stock is traded at $36.8, meaning that the stock is undervalued by 56.7%. This presents a great opportunity for investors who are willing to buy low and hold for the long-term. More…
Peers
The airline industry is a fiercely competitive market. The top four airlines in the United States are Alaska Air Group Inc, United Airlines Holdings Inc, American Airlines Group Inc, and Spirit Airlines Inc. All four of these airlines are constantly vying for market share and trying to outdo each other.
Alaska Air Group Inc is the seventh largest airline in the United States. The company was founded in 1932 and is headquartered in Seattle, Washington. Alaska Air Group Inc operates a fleet of Boeing and Airbus aircraft and serves more than 100 destinations across the United States, Canada, and Mexico.
United Airlines Holdings Inc is the world’s largest airline. The company was founded in 1926 and is headquartered in Chicago, Illinois. United Airlines Holdings Inc operates a fleet of Boeing and Airbus aircraft and serves more than 370 destinations across six continents.
American Airlines Group Inc is the world’s largest airline. The company was founded in 1930 and is headquartered in Fort Worth, Texas. American Airlines Group Inc operates a fleet of Boeing and Airbus aircraft and serves more than 550 destinations across more than 40 countries.
Spirit Airlines Inc is an ultra-low-cost carrier. The company was founded in 1980 and is headquartered in Miramar, Florida. Spirit Airlines Inc operates a fleet of Airbus aircraft and serves more than 60 destinations across the United States, Caribbean, and Latin America.
– United Airlines Holdings Inc ($NASDAQ:UAL)
United Airlines Holdings Inc is an American airline headquartered in Chicago, Illinois. It is the world’s third-largest airline when measured by revenue, after American Airlines and Delta Air Lines. United operates a large domestic and international route network, with an extensive presence in the Asia-Pacific region. The airline has a significant presence in the United hub of Los Angeles.
– American Airlines Group Inc ($NASDAQ:AAL)
American Airlines Group Inc has a market cap of 8.58B as of 2022, a Return on Equity of 5.3%. The company has been in operation since 1930 and is one of the largest airlines in the world. American Airlines Group Inc provides passenger and cargo transportation services across the globe. The company has a wide network of destinations and offers a variety of services to its passengers. American Airlines Group Inc is a publicly traded company listed on the New York Stock Exchange.
– Spirit Airlines Inc ($NYSE:SAVE)
Spirit Airlines Inc is an airline company that has a market cap of 2.13B as of 2022. The company has a return on equity of -10.47%. Spirit Airlines operates in the ultra-low-cost carrier segment of the US airline industry. The company provides air transportation for passengers and cargo. Its routes span the US, Latin America, and the Caribbean.
Summary
Alaska Air Group is a good investment choice, despite facing some medium-term headwinds. The company has a strong balance sheet and is performing well financially. Its operating margin has remained high over the last three years, while its return on invested capital is healthy.
Additionally, the company is investing in its fleet to improve operational efficiency, which should help to contain costs. Furthermore, Alaska Air is well-positioned to benefit from the continued recovery of the global airline industry, which will lead to more passenger demand. Therefore, investors who are looking for growth and income should consider investing in Alaska Air Group.
