Southwest Airlines Stock Takes Off After Barclays Upgrade

The equity sports attractively priced premiums at the moment

Digital Content Manager
Oct 4, 2021 at 10:16 AM
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The shares of Southwest Airlines Co (NYSE:LUV) are up 3.4% at $56.10 at last check, after the company earned an upgrade from Barclays to "overweight" from "equal weight," as well as a price-target hike to $75 from $64, which is roughly 38% higher than its last close. The analyst in coverage praised the airline's strong balance sheet, its favorable order book with Boeing (BA), and historically profitable business model, which have all contributed to a short-term bullish stance.

The brokerage bunch was already optimistic towards Southwest Airlines stock coming into today, making this bull note even more impressive. Of the 13 analysts in coverage, 12 called it a "buy" or better, while only one said "hold." Plus, the 12-month consensus target price of $66.18 is a 17.7% premium to current levels.

The stock appears to be charging higher after a couple of months trading sideways. Shares have found a floor at the $47 level, and bounced off the 320-day moving average in mid-September. Plus, today's pop has helped LUV surge above resistance from the 180-day moving average for the first time since July. Year-over-year, the equity is up 44.9%.

Call traders are blasting the security today. So far, 15,000 calls and 3,741 puts have been exchanged -- double the intraday average. Most popular is the weekly 10/8 56-strike call, followed by the October 59 call, with positions being opened at both. 

Now looks like an opportune time to bet on Southwest Airline stock's next move with options. The security's Schaeffer's Volatility Index (SVI) of 33% stands higher than just 13% of readings from the last 12 months, indicating the options market is pricing in low volatility expectations for the equity right now. 

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