Will This Downgrade Hurt Alaska Air (ALK) Stock Today?

NEW YORK (TheStreet) -- Alaska Air (ALK) stock has been downgraded to "hold" from "buy," Stifel Nicolaus said Friday. The firm said the revision was a valuation call based on a $95 price target. 

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Separately, TheStreet Ratings team rates ALASKA AIR GROUP INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate ALASKA AIR GROUP INC (ALK) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth significantly trails the industry average of 42.7%. Since the same quarter one year prior, revenues slightly increased by 7.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Airlines industry and the overall market, ALASKA AIR GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Powered by its strong earnings growth of 164.70% and other important driving factors, this stock has surged by 68.25% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ALK should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • ALASKA AIR GROUP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ALASKA AIR GROUP INC increased its bottom line by earning $7.17 versus $4.37 in the prior year. For the next year, the market is expecting a contraction of 0.4% in earnings ($7.14 versus $7.17).
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