Alaska Air Story Overview

ALK -- USA Stock  

USD 62.58  0.21  0.34%

Macroaxis News
  
By David Taylor

Alaskan Airlines (ALK) has recently merged operations wth Virgin Air.  You can now schedule your flight with either of these airlines via their respective websites.  The thinking is with the merge is that there would ultimately be cost savings from running just one airline versus two, and, there would be a large amount of additional service to passengers from this.  Alaska is predominantly on the West Coast of the United States whereas Virgin is on the East Coast as well as in Europe.  Now, given the two combined airlines the company’s revenue should be increased.  After all, there will be far more increased services available to the combined carriers.  And, since the companies are already flying their planes being able to add more passengers to the same flights will be mostly pure profits.  What is more, the price of fuel is still relatively inexpensive. 

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Fama & French Classification
Alaska Airlines has merged with Virgin Airlines and is ready to take off.

Alaskan Airlines has now taken over Virgin's routes in the United States and you can already start booking your flights on Alaskan through Virgin's website.  The combined airline will likely have a lot of cost savings for the airline as well as additional revenue abilities.  The services that are going to be offered to passengers will be enough to have the stock really take off.  




Alaskan Airlines (ALK) has recently merged operations wth Virgin Air.  You can now schedule your flight with either of these airlines via their respective websites.  The thinking is with the merge is that there would ultimately be cost savings from running just one airline versus two, and, there would be a large amount of additional service to passengers from this.  Alaska is predominantly on the West Coast of the United States whereas Virgin is on the East Coast as well as in Europe.  Now, given the two combined airlines the company’s revenue should be increased.  After all, there will be far more increased services available to the combined carriers.  And, since the companies are already flying their planes being able to add more passengers to the same flights will be mostly pure profits.  What is more, the price of fuel is still relatively inexpensive.  A barrel of oil is still only in the $50s.  With costs under control, the potential of larger revenue, there are a lot of reasons to consider this stock.  

But, then when you look at the earnings and the price of the stock, you may have even more reasons to buy the stock.  Here are the earnings for the past several years:

2011:    $3.41

2012:    $4.47  

2013:    $7.26 

2014:    $4.47  

2015:    $6.61

There was a drop in the earnings from ’13 - ’14.  Other than that these earnings have been increasing year-over-year and are set to do so in 2016.  The stock is trading at about $90 per share, whereas the 2016 earnings are looking to come in final around $8.50 per share.  That puts the stock at nearly 10-times earnings.  I am usually targeting stocks at that level.  So, this makes me want to, at the very least, put the company’s stock on my watch list.  

The fundamentals are strong for the overall economy in the United States.  From that perspective, there is a lot of potential for continued expansion in the airline’s revenue.  But, I have to be honest, I was surprised given the fundamentals of the economy and the airline itself, this stock would be priced as cheap as it is.  This is not the first airline I have looked at, I evaluated Delta as well, and both airlines were trading at lower ratios.  Still, I think the stock has a very strong foundation and can do well going forward.  

I have also written that I think overall the stock market is overpriced.  The historical average for price-to-earnings is 15.  Currently it is sitting at 26.  That is way too high and either the stock market needs to come down to more attainable levels or companies are going to have to start earning more.  I am doubtful that companies are going to be able to increase earnings at an outpaced level so we will more than likely be seeing the stock market slide down some.  As it is there stock market has had a very difficult time getting across the 20,000 level.  

Given a potential selling in the stock market putting Alaska Airlines on your watchlist is a prudent move.  The stock is trading at nearly 10 times earnings now; it is just slightly above that, and any overall selling in the equity market would only serve as offering a better entry point into a great investment opportunity.  

Alaskan is very well positioned for the future as well as very well priced.  The combined company is set to increase its revenue over the forthcoming period.  And, holding on to this company in your portfolio will prove to be a good move. 

Story Momentum

This article from Macroaxis published on 11 of January contributed to the next trading period closing price depreciation.The overall trading delta to the next next day price was 0.58% . The overall trading delta when the story was published to current price is 33.51% .

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Alaska Air is rated below average in debt to equity category among related companies. Debt to Equity is calculated by dividing the Total Debt of a company by its Equity. If the debt exceeds equity of a company then the creditors have more stakes in a firm than the stockholders. In other words, Debt to Equity ratio provides analysts with insights about composition of both equity and debt, and its influence on the valuation of the company.
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