The holiday season is underway, and already travel numbers are closing in on their 2019 record levels. While they likely won’t exceed that prior peak for 2021, 2022 could be a big winner. And companies in the transportation sector are set to continue to benefit.
That’s being seen in the bottom line of companies as well, with many increasing their estimates for how they’ll perform financially this year.
While rising fuel costs are a yellow flag, improving travel numbers bode well for airline firms. And for those that are cost-conscious, like Southwest Airlines (LUV), improving travel numbers have meant the company expects only a modestly lower level of revenue compared to pre-Covid 2019.
That could be a boost for shares, which are slightly down compared to a year ago, and nearly 30 percent off their 2021 peak.
Action to take: The company has been profitable in the most recent quarter, and shares are at about 22 times forward earnings. Improving numbers in 2022 could make shares look inexpensive today. That could mean a much higher share price in the year ahead. The company isn’t currently paying a dividend, however.
For traders, shares still look like they’re in a downtrend or trying to bottom out. It might be wise to wait a few weeks to confirm a bullish trend is underway before buying shares or making a trade.
But a long-dated call option like the January 2023 $50 calls, going for about $5.40, offer triple-digit return potential on any rally in shares in the next year, an event likely to happen at some point in that timeframe.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.