Jim Cramer: Southwest Shouldn't Be Up 2 Days in a Row

Is now the time to buy Southwest or other airlines? Jim Cramer weighs in.
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What stocks are you looking at?

Jim Cramer has some thoughts about Southwest and other stocks. 

But before we dive into Cramer's thoughts, let's recap what UBS analyst Myles Watson had to say about the company in a note released Tuesday, May 26.

Watson said in a note to clients that he was upgrading the Dallas air carrier to buy from neutral "as we see a clearer path for domestic travel recovery."

"Moreover, unlike many other airlines, the balance sheet position of LUV is remarkably clean (near-net cash balance sheet), which provides protection from any step backward in demand under another wave of COVID-19," said Watson, who also raised his price target from $37 to $41 a share.

Watson said Southwest "has the best trajectory at getting back to pre-crisis earnings and cash flow in '23/24."

So, what does Cramer think?

"Let's look at Southwest Airlines (LUV). This is the best-run airline, bar none. Yet, because of the sad shape of the industry, it had to take $3.2 billion in payroll support. That pretty much, for most people, doomed this fantastic company, that and the 55 million shares they offered at the end of April and $1 billion in convertible senior notes," wrote Cramer.

He ended the article with, "What's bad can't be that bad and what's good? It can't be that good."

Cramer explained that he doesn't think that Southwest should be up $3 on Tuesday and up another $3 on Wednesday.

You can follow Jim Cramer and Katherine Ross on Twitter at @JimCramer and @byKatherineRoss. Read more from Katherine Ross here.

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