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What’s Next For Alaska Air Stock After A 24% Fall This Year And A Downbeat Q3?

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What’s Next For Alaska Air Stock After A 24% Fall This Year And A Downbeat Q3?


Alaska Air (NYSE: ALK) recently reported its Q3 results, with revenues and earnings falling below the street estimates. The company reported revenue of $2.8 billion, reflecting no growth from the prior year period and below the $2.9 billion street estimate. Its adjusted earnings of $1.83 per share were down 28% y-o-y and below the consensus estimate of $1.86 per share. In this note, we discuss Alaska Air’s stock performance, key takeaways from its recent results, and valuation.

ALK stock has suffered a sharp decline of 40% from levels of $50 in early January 2021 to around $30 now, vs. an increase of about 15% for the S&P 500 over this roughly 3-year period. ALK has had a poor run, with the stock losing value in each of the last three years. Returns for the stock were 0% in 2021, -18% in 2022, and -24% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 12% in 2023 – indicating that ALK underperformed the S&P in 2021 and 2023.

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In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the industrial sector, including UPS, CAT, and UNP, and even for the mega-cap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could ALK face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it see a recovery? From a valuation perspective, ALK stock looks attractive and will likely see higher levels over time. We estimate Alaska Air’s Valuation to be $47 per share, reflecting over 45% upside from its current levels of $32. Our forecast is based on a 10x P/E multiple for ALK and expected earnings of $4.75 on a per-share and adjusted basis for the full year 2023. The company lowered its earnings outlook to now be in the range of $4.25 and $4.75 (vs. the $5.50 and $7.50 range earlier).

Alaska Air’s revenue of $2.8 billion in Q3 was flat y-o-y. The company reported a 14% rise in available seat miles, while the load factor was down 190 bps, and yield also declined 10%, weighing on the overall top-line growth. The company saw its adjusted pre-tax margin plunge to 11.4% from 15.6% in the prior-year quarter. It expects the metric to fall between 7% and 8% for the full year 2023. Rising fuel prices will likely weigh on the company’s bottom line in the near-term. Flat revenues and margin contraction led to a 28% y-o-y fall in the bottom line to $1.83 on a per-share and adjusted basis in Q3’23.

ALK stock looks attractive at $32, trading at just 0.4x sales, compared to the last five-year average of 1.1x We believe investors will likely be better off picking ALK after its recent fall for robust gains in the long run. However, rising fuel prices and falling yields remain key risk factors in realizing these gains.

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While ALK stock looks undervalued, it is helpful to see how Alaska Air’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

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Alaska

State of Alaska will defend its right to facilitate oil and gas development

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State of Alaska will defend its right to facilitate oil and gas development


Last week, Superior Court Judge Andrew Guidi indicated he will rule that Alaska does not have authority to permit access across its lands to facilitate oil and gas development on the North Slope.

The Alaska Dept. of Natural Resources plans to fight and appeal any final adverse ruling that undermines the state’s constitutional interests in resource development.

The Department of Natural Resources has issued a permit allowing Oil Search Alaska (OSA) to cross the Kuparuk River Unit, operated by Conoco Phillips Alaska, to develop the Pikka Unit. As described in the State’s brief to the court, “the denial of such access implicates the delay of development of millions of barrels of oil and billions of dollars of public revenues.”

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“The State of Alaska has a constitutional obligation to maximize the development of our resources,” DNR Commissioner John Boyle said on Nov. 22. “We have to confirm with the Supreme Court that we have the authority to permit access for all developers to ensure we can meet this obligation.”

Once the Superior Court issues the final judgement, Alaska will be able to file its appeal. This is expected to occur in the coming weeks.

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Close encounters with the Juneau kind: Woman reports strange lights in Southeast Alaska skies

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Close encounters with the Juneau kind: Woman reports strange lights in Southeast Alaska skies


ANCHORAGE, Alaska (KTUU) – For Juneau resident Tamara Roberts, taking photos of the northern lights was just a hobby — that is until a different light altogether caught her eye.

Capturing what she’s called strange lights in the skies of Juneau near her home on Thunder Mountain, Roberts said she’s taken 30 to 40 different videos and photos of the lights since September 2021.

“Anytime I’m out, I’m pretty sure that I see something at least a couple times a week,” Roberts said. “I’m definitely not the only one that’s seeing them. And if people just pay more attention, they’ll notice that those aren’t stars and those aren’t satellites.”

Roberts has been a professional photographer for over 20 years. She said she changed interests from photographing people to wildlife and landscape when she moved to Juneau 13 years ago.

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Once she started making late-night runs trying to capture the northern lights, she said that’s when she started encountering her phenomenon.

Roberts said not every encounter takes place above Thunder Mountain: her most recent sighting happened near the Mendenhall Glacier while her stepmom was visiting from Arizona.

“She’d never been here before, so we got up and we drove up there, and lo and behold, there it was,” Roberts said. “I have some family that absolutely thinks it’s what it is, and I have some family that just doesn’t care.”

Roberts described another recent encounter near the glacier she said was a little too close for comfort. While driving up alone in search of the northern lights, she expected to see other fellow photographers out for the same reason as she normally does.

But this night was different.

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“I’ve gone up there a million times by myself, and this night, particularly, it was clear, it was cold and the [aurora] KP index was high … so as I’m driving up and there’s nobody there. And I was like, Okay, I’ll just wait and somebody will show up.’ So I backed up into the parking spot underneath the street light — the only light that’s really there on that side of the parking lot — and I turned all my lights off, left my car running, looked around, and there was that light right there, next to the mountain.”

Roberts said after roughly 10 minutes of filming the glowing light, still not seeing anyone else around, she started to get a strange feeling that maybe she should leave.

“I just got this terrible gut feeling,” Roberts said. “I started to pull out of my parking spot and my car sputtered. [It] scared me so bad that I just gunned the accelerator, but my headlights … started like flashing and getting all crazy.

“I had no headlights, none all the way home, no headlights.”

According to the Juneau Police Department, there haven’t been any reports of strange lights in the sky since Sept. 14, when police say a man was reportedly “yelling about UFOs in the downtown area.”

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Responding officers said they did not locate anything unusual, and no arrests were made following the man’s report.

The National Oceanic and Atmospheric Administration National Weather Service in Juneau also said within the last seven days, no reports of unusual activity in the skies had been reported. The Federal Aviation Administration in Juneau did not respond.

With more and more whistleblowers coming forward in Congressional hearings, Roberts said she thinks it’s only a matter of time before the truth is out there.

“Everybody stayed so quiet all these years for the fear of being mocked,” Roberts said. “Now that people are starting to come out, I think that people should just let the reality be what it is, and let the evidence speak for itself, because they’re here, and that’s all there is to it.”

See a spelling or grammar error? Report it to web@ktuu.com

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‘We’re ready to test ourselves’: UAA women’s hoops faces tallest task yet in another edition of the Great Alaska Shootout

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‘We’re ready to test ourselves’: UAA women’s hoops faces tallest task yet in another edition of the Great Alaska Shootout


ANCHORAGE, Alaska (KTUU) – Heading into Friday’s game with a 6-1 record, Alaska Anchorage women’s basketball is faced with a tall task.

The Seawolves are set to face Division I Troy in the opening round of the 2024 Great Alaska Shootout. Friday’s game is the first meeting between the two in program history.

“We’re gonna get after it, hopefully it goes in the hoop for us,” Seawolves head coach Ryan McCarthy said. “We’re gonna do what we do. We’re not going to change it just because it’s a shootout. We’re going to press these teams and we’re going to try to make them uncomfortable. We’re excited to test ourselves.”

Beginning the season 1-4, the Trojans have faced legitimate competition early. Troy has played two ranked opponents to open the season, including the 2023 national champion and current top-10 ranked Louisiana State University on Nov. 18. The Trojans finished runner-up in the Sun Belt Conference with a 15-3 record last season.

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“At the end of the day, they’re women’s basketball players too. They’re the same age as us and they might look bigger, faster and stronger, but we have some great athletes here,” junior guard Elaina Mack said. “We’re more disciplined, we know that we put in a lot of work, and we have just as good of a chance to win this thing as anybody else does.”

The 41st edition of the tournament is also set to feature Vermont and North Dakota State. The two Div. I squads will battle first ahead of UAA’s match Friday night.

All teams will also play Saturday in a winner and loser bracket to determine final results.

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