Southwest Airlines (LUV) Soars 3.73% on JPMorgan Upgrade, 7.80% Rally Since January 10 Driven by Strategic Overhaul

The share price rose to its highest level so far this month today, with an intraday gain of 4.89%. Southwest Airlines (LUV) extended its five-day winning streak, climbing 3.73% to mark a 7.80% rally since January 10. The surge follows a strategic overhaul and a key analyst upgrade, signaling renewed investor confidence in the carrier’s long-term repositioning.

JPMorgan’s upgrade of Southwest to Overweight, with a price target raised from $36 to $60, catalyzed the rally. Analyst Jamie Baker highlighted the airline’s shift to EPS-based guidance starting in 2026 as a pivotal catalyst, diverging from its historical reliance on RASM metrics. Operational changes—including the removal of free bag policies, assigned seating, and tiered fare structures—aim to boost revenue streams, while planned cabin modernizations in early 2026 are expected to enhance customer satisfaction and efficiency. These moves address long-standing gaps in Southwest’s business model, aligning with broader investor demand for clearer financial transparency.

The stock’s recent momentum is underscored by a projected 2026 EPS of $5, far exceeding the current $2.98 consensus. Despite modest profitability metrics, analysts argue Southwest’s market leadership—serving as the largest domestic U.S. carrier—and its fleet of 800 Boeing 737s position it to outperform peers. A January 29 earnings report and guidance update will serve as critical near-term catalysts, with JPMorgan placing the stock on its “Positive Catalyst Watch” list. Meanwhile, a partnership with Turkish Airlines, launching in 2026, expands its international reach, offering seamless U.S.-Istanbul routes and aligning with industry trends toward network expansion.

While valuation concerns persist—reflected in a P/E ratio of 66.03—analysts contend the market’s skepticism toward Southwest’s historical guidance creates a re-rating opportunity. A conservative $4.50 EPS target could justify the $60 price target, given the airline’s undervaluation relative to peers. However, risks remain, including insider selling activity and past inconsistencies in meeting guidance. The coming months will test whether Southwest’s strategic initiatives and operational improvements can sustain investor optimism, with the 2026 transition to EPS-based metrics likely to reshape its valuation trajectory.