Alaska Air Group Options Trade Idea

Buy the Oct $100/$115 call spread for a $4.00 debit or better. (Buy the Oct $100 call and sell the Oct $115 call, all in one trade.)

Stop loss: None

First upside target: $8.00

Second upside target: $12.00

Third upside target: $14.00

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At the time of publication, Warren was long the Oct $100/$115 call spreads.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.


Now let's look at TheStreet Ratings' take on Alaska Air:

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, impressive record of earnings per share growth, revenue growth, notable return on equity and good cash flow from operations. 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:

  • Powered by its strong earnings growth of 164.70% and other important driving factors, this stock has surged by 84.42% 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. We feel that this trend should continue. During the past fiscal year, ALASKA AIR GROUP INC increased its bottom line by earning $7.17 versus $4.37 in the prior year. This year, the market expects an improvement in earnings ($7.25 versus $7.17).
  • The revenue growth significantly trails the industry average of 45.9%. 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.
  • 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.
  • Net operating cash flow has increased to $242.00 million or 14.15% when compared to the same quarter last year. Despite an increase in cash flow, ALASKA AIR GROUP INC's cash flow growth rate is still lower than the industry average growth rate of 62.95%.

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