Southwest Airlines (LUV)
Rothschild upgraded Southwest Airlines (LUV) from sell to neutral, a more balanced call. Price target raised to $40 from $35. This came even as oil prices pulled back, which usually helps airlines.
The upgrade rests on Southwest's business model overhaul, which is bringing in better revenue than expected. Over the past year the airline added reserve seating, extra legroom products for a fee, and other add-on fees. Southwest traditionally did not offer assigned seats. These add-on fees are now the fastest growing part of passenger revenue since the changes started. The airline reached about $1 billion in extra yearly revenue by Q2.
The changes are controversial. The risk is that Southwest gives up the customer-friendly differences that defined its brand and moves closer to the big legacy carriers. Still, the shift is adding to the bottom line for shareholders.
Airbnb (ABNB)
Citizens raised its price target on Airbnb (ABNB) to $200 from $190 and kept its market outperform rating. Airbnb has been a strong performer this year, though the stock had not done well over the prior five years since the pandemic. It showed little movement on the news.
Several catalysts drive the call. Airbnb is moving beyond its home-sharing base into traditional hotel inventory, which widens its market and makes it more competitive against travelers who start their search on Booking or Expedia. It is adding "reserve now, pay later" payment options; this global rollout cuts the upfront cost of booking. Airbnb is also simplifying its fee structure, long a sore point, so the total price shown to customers is clearer.
Etsy (ETSY)
BTIG upgraded Etsy (ETSY) from neutral to buy with a $90 price target. Shares moved higher on the news. The call is based on valuation. BTIG had downgraded the stock in July because it carried a premium; after a pullback, the risk-return improved and the valuation now looks in line with peers.
Underlying metrics support the view. Active buyers in Q2 rose to 87 million, and gross buyer additions accelerated 7.1%. The mobile app has become an important part of the business: gross merchandise sales on the app rose 12.5%, and the app now makes up about 47% of gross merchandise sales, close to half. Etsy also cut costs through strategic layoffs, which lifts its bottom-line outlook.
