Well, let's see...the weekend's here and we can sit back and reflect on ALK. I want to make a decision by Monday morning whether to close another position and grab summadis action. So, a few points as an invitation to comments from wiser heads.
1. 4Q earnings are approx. 3 times anticipated, but stock only rises 12-odd%. Something doesn't fit here. Do they know something I don't, or vice versa?
2. Could this be sector-aversion? Not being that familiar with airlines I checked out some other regionals, and they had crappy earnings, if any earnings at all. Are investors afraid of small airlines generally?
3. ALK has good general growth figures for the last 5 years. It's a solid company with young planes but a long history, and as I noted in one of my previous posts has loyal employees and is considered a superior airline from a customer service standpoint (loyal, satisfied passengers). Aside from this earnings spike, it should be a good long-term growth prospect.
4. ALK has room to grow. It has more flights to Russia than any other US airline, and its good north Pacific presence should make other areas open to it as well for future expansion.
5. Granted there is the danger of a crisis such as regional economic problems (ie loss of jobs in Pac NW area would hurt Horizon Air), or an increase in oil prices, or some crazy action by the federal govt. But all companies are at risk for something, and no reason to believe any of these things is imminent.
6. The consensus (Seattle Times, wire services) seems to be that the big reason for the earnings boost is an end to fare wars (they called it "more realistic pricing"). While fare wars erupt periodically, it sounds as if ALK has established some dominance in its primary areas and isn't likely to be challenged soon, especially by Reno which is losing money and Markair which folded. So, possible the increased earnings will continue.
7. My biggest problem is I'm not a technician either, and I would love it if someone ran some numbers on this. For instance, if ALK continues to post similar numbers, what will the PE look like? I sure like that 13-ish PE it had before the spike, but what about now, with the numbers having been skewed by this increase in earnings?
Comments anyone? |
