Is Alaska Air Group’s Recent 10% Rally a Sign of Opportunity for 2025?

• Thinking about Alaska Air Group and wondering if its shares are a good deal right now? Let’s dive beneath the headlines and see whether the stock’s current price might offer value for your portfolio.
• The stock has seen a big bump lately, jumping 10.1% over the last week. However, it is still down 33.9% year-to-date and 19.3% over the past twelve months.
• Much of this recent movement follows headlines around the airline sector, where factors like renewed travel demand, shifting fuel costs, and industry consolidation chatter have had investors recalibrating risk and opportunity. In Alaska Air Group’s case, updates on strategic partnerships and routes have also played into the volatility.
• On traditional valuation checks, Alaska Air Group scores a 3 out of 6. This means it is considered undervalued in half of the main metrics analysts look for. We’ll break down what these methods reveal, and we’ll also explore a smarter, more holistic approach to valuation that could change the way you see this stock.

Find out why Alaska Air Group's -19.3% return over the last year is lagging behind its peers.

Approach 1: Alaska Air Group Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a valuation approach that forecasts a company’s future cash flows and then discounts them back to their value today, to estimate what the whole business is actually worth. This helps investors determine whether the stock price in the market is a bargain or an overpay.

For Alaska Air Group, the latest DCF analysis uses a two-stage model based on Free Cash Flow to Equity. Currently, the company is generating negative free cash flow, sitting at -$452 million over the last twelve months. Looking ahead, analysts expect this figure to improve substantially, projecting free cash flow of roughly $446 million in 2027. In the longer term, cash flows are estimated to continue growing, reaching about $785 million by 2035, with growth tapering off as forecasts move further into the future.

All these projected cash flows, adjusted for risk and time, give an intrinsic value of around $58.71 per share for Alaska Air Group. Currently, the stock is trading at a price that is about 27.6% below this calculated fair value, suggesting meaningful upside.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Alaska Air Group is undervalued by 27.6%. Track this in your watchlist or portfolio, or discover 932 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Alaska Air Group.

Approach 2: Alaska Air Group Price vs Earnings

The Price-to-Earnings (PE) ratio is one of the most widely used methods to value profitable companies because it directly compares a company's current share price with its earnings per share. This makes it intuitive for investors who want to understand what they are paying for each dollar of profit. For companies like Alaska Air Group, which are generating positive earnings, the PE ratio is especially relevant.

It is important to remember that a "normal" or "fair" PE ratio is not the same for every company. Industry growth expectations and business risks play a major role. Fast-growing, stable companies often have a higher PE than slower-growing or more volatile peers.

Alaska Air Group’s current PE ratio stands at 32.9x. That is above the peer group average of 10.8x and higher than the broader airline industry average of 9.0x. At first glance, this premium might suggest the stock is overvalued relative to similar businesses. However, these basic comparisons do not provide the complete picture.

This is where Simply Wall St’s proprietary “Fair Ratio” becomes relevant. The Fair Ratio for Alaska Air Group is 56.3x. Unlike simple industry or peer comparisons, this Fair Ratio considers the company’s earnings growth outlook, profit margins, market cap, industry dynamics, and overall risk profile. By weighing these important details, the Fair Ratio provides a more tailored sense of what the stock should reasonably command in the market.

When comparing Alaska Air Group’s actual PE of 32.9x to its Fair Ratio of 56.3x, the shares appear undervalued according to this more holistic and forward-looking measure, even if they seem expensive on basic comparisons.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1442 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Alaska Air Group Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. Narratives offer a simple yet powerful way to invest by letting you capture your personal story or perspective behind a company. Essentially, it’s how you connect the dots between future revenue, earnings, margins, and what you believe the stock is truly worth. A Narrative links your outlook for Alaska Air Group directly to a financial forecast and an estimated fair value, giving you a living framework that updates automatically as new data, news, or earnings reports emerge. Narratives are easily accessible for Alaska Air Group on Simply Wall St’s Community page, where millions of investors compare their views and refine their decision making. By checking if your Narrative’s Fair Value is above or below the current share price, you can quickly spot buying or selling opportunities linked directly to your assumptions. For example, some investors see upside if Alaska Air Group achieves revenue growth above 6.5% and expanding margins, placing their fair value at $80, while others are more cautious, setting a fair value closer to $56 if cost pressures persist. In seconds, you can create, compare, and adjust your own view and invest with your story in mind.

Do you think there's more to the story for Alaska Air Group? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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