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ALK

Alaska Air Group NYSE:ALK Stock Report

Last Price

US$40.35

Market Cap

US$5.1b

7D

-7.2%

1Y

-33.3%

Updated

28 Sep, 2022

Data

Company Financials +
ALK fundamental analysis
Snowflake Score
Valuation1/6
Future Growth3/6
Past Performance1/6
Financial Health4/6
Dividends0/6

ALK Stock Overview

Alaska Air Group, Inc., through its subsidiaries, provides passenger and cargo air transportation services.

Alaska Air Group, Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Alaska Air Group
Historical stock prices
Current Share PriceUS$40.35
52 Week HighUS$63.76
52 Week LowUS$38.19
Beta1.44
1 Month Change-9.61%
3 Month Change0.75%
1 Year Change-33.25%
3 Year Change-35.67%
5 Year Change-50.09%
Change since IPO655.09%

Recent News & Updates

Sep 15

Alaska Air Group: Rough Winds Ahead

Summary Heavy economic losses from the COVID-19 crisis are still affecting Alaska Air Group. Intrinsic value is skewed when accounting for debt load. The transition into a new fleet and clean fuel will create an initial financial and logistical strain. Although the company has solid future plans, I price current fair valuation around $28-$38 and recommend a hold. Editor's note: Seeking Alpha is proud to welcome Jessica Wehr as a new contributor. It's easy to become a Seeking Alpha contributor and earn money for your best investment ideas. Active contributors also get free access to SA Premium. Click here to find out more » Alaska Air Group (ALK) was able to weather the effects of the COVID-19 crisis and remain somewhat stable. However, the economic strain on the airline industry during the pandemic was great and the recovery is not over. The effect of the crisis, combined with debt load and a possible impending recession, will create significant financial stress on all airline companies, including ALK. Although I believe ALK has made appropriate strategic decisions in response to the crisis, the combination of multiple headwinds will affect growth in the near future. I consider the current valuation to be overpriced and recommend a hold on the stock. A Bright but Delayed Future ALK is collaborating with Microsoft (MSFT) in support of a clean fuel project. SAF (sustainable aviation fuel) will bring innovation and efficiency to the airline industry. ALK and MSFT have signed a Memorandum of Understanding in support of a fossil-free chemical company, Twelve's SAF project. The integration of SAF fuel will bring economic benefit and eco-friendly production to airlines. Airlines will receive a tax credit for using SAF, which will increase revenue for the company. SAF might also present initial challenges. Challenges could include limited federal policies regarding SAF use and time-consuming documentation to record the environmental impact. This might require positions needed to properly document and track policies, which would incur a cost to the company. Production can also be affected by incorporation of SAF due to an additional processing step. SAF includes a processing step to blend SAF fuel with conventional fuel. The blended fuel also has to meet certain requirements in order to be approved for use. After verification, the composition of the fuel needs to be determined for processing purposes and emissions documentation. ALK has a goal of reaching net-zero carbon emissions by 2040, and has signed an agreement with Aemetis (AMTX) to purchase 13 million gallons of SAF over a seven-year term agreement. Although SAF will ultimately boost production and decrease expense, it does not come without any expenses. Allowances will have to be made in order to regulate this fuel, which will incur costs. ALK has been making progress toward simplifying to an all-Boeing single fleet. This simplification will support a low-cost/high-productivity business model. However, in order to make this adjustment, old planes must be retired and new planes purchased. According to ALK's 10-Q, aircraft rent expense has increased by 18% in Q2 2022. The 10-Q also highlights additional aircraft purchases incurring expense. A total of 80 orders for aircrafts are set for 2022-26, as depicted by the chart below. With current debt obligations, order for new aircrafts, and a possible impending recession, growth might continue at a slower-than-desired pace. Taking into consideration debt load and impending expenses, I consider ALK's trading price to be overvalued. Aircraft Orders (Alaska Air Group Form 10-Q) Valuation I price current intrinsic value for ALK at $95 per share. However, while utilizing a discounted cash flow rate, debt is not adequately captured. In 2020, ALK took out a $267 million loan to cover for employee salaries during the crisis. In addition, the conversion to a single fleet will increase debt obligations. Levered Cash Flow Chart (Seeking Alpha) Free cash flow has been steady, but not adequate to offset current debt obligations. Year-ended 2020 free cash flow was in the negative. It has gained momentum and positive flow into 2021 and 2022. Considering airlines are a consumer-based and cyclical industry, we could see a drop in sales in an economic downturn and therefore a further drop in free cash flow in the coming year. I calculate ALK's cash ratio at 0.69, indicating an inability to cover the debt load sufficiently. My main concern in evaluating any company is if they have enough cash to cover their debt, especially in an economic downturn or crisis. ALK is currently out of balance, with debt being too high and cash flow being too low. I would recommend a hold for fair price. ALK Technical Chart (Trading View)

Jul 30
Alaska Air Group (NYSE:ALK) Will Be Hoping To Turn Its Returns On Capital Around

Alaska Air Group (NYSE:ALK) Will Be Hoping To Turn Its Returns On Capital Around

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want...

Shareholder Returns

ALKUS AirlinesUS Market
7D-7.2%-5.9%-2.0%
1Y-33.3%-38.0%-20.3%

Return vs Industry: ALK exceeded the US Airlines industry which returned -40.3% over the past year.

Return vs Market: ALK underperformed the US Market which returned -22.1% over the past year.

Price Volatility

Is ALK's price volatile compared to industry and market?
ALK volatility
ALK Average Weekly Movement5.0%
Airlines Industry Average Movement6.7%
Market Average Movement6.9%
10% most volatile stocks in US Market15.8%
10% least volatile stocks in US Market2.8%

Stable Share Price: ALK is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.

Volatility Over Time: ALK's weekly volatility (5%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
193222,092Ben Minicuccihttps://www.alaskaair.com

Alaska Air Group, Inc., through its subsidiaries, provides passenger and cargo air transportation services. The company operates through three segments: Mainline, Regional, and Horizon. It flies to approximately 120 destinations throughout North America.

Alaska Air Group, Inc. Fundamentals Summary

How do Alaska Air Group's earnings and revenue compare to its market cap?
ALK fundamental statistics
Market CapUS$5.11b
Earnings (TTM)US$208.00m
Revenue (TTM)US$8.19b

24.6x

P/E Ratio

0.6x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
ALK income statement (TTM)
RevenueUS$8.19b
Cost of RevenueUS$6.31b
Gross ProfitUS$1.88b
Other ExpensesUS$1.67b
EarningsUS$208.00m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)1.64
Gross Margin22.96%
Net Profit Margin2.54%
Debt/Equity Ratio60.6%

How did ALK perform over the long term?

See historical performance and comparison