Southwest Airlines is Very Attractive Right Now

Southwest Airlines (LUV), down 24% this year, more than any airline. Their stock price has recently dropped due to a 50% jump in oil prices, as well as having their first death on a plane since 2009. This recent incident has caused fewer passengers, but largely because the company has slowed advertising after the accident. United Continental announced aggressive expansion plans early in the year that caused investors to worry that competition is ramping up.
Now with the buying opportunity. Their stock price is very low so it's very attractive to investors, and their low price has been knocked down only on temporary issues. A Cowen analyst said that Southwest "deserves a multiple of 15 times, would lift shares to $63 from a recent $50."
For the future, fare wars with competitor airlines pinch airline profits. US air travel was up 5.3% in April, so the industry must match capacity with demand. On the upside, Southwest hedges its fuel costs, which is protecting themselves from $80 oil prices, and is the only airline that does this. Southwest historically pays larger tax bills than rivals, therefore the company can take advantage of the new corporate tax rate of 20% with them being the largest airline that only operates in the U.S. With this extra money saved from corporate taxes, Southwest is either going to buyback stock or invest their money in a new fleet, which is needed. Let's hope that they go with buying back stock, but buying a new fleet won't mean a drop in the stock price, instead it will cause the price to steadily increase instead of almost instantly when buying back stock.