This regional airline can rally more than 30% as pilot hiring trends improve, Raymond James says
SkyWest shares can continue their ascent as pilot hiring becomes less challenging, Raymond James said. Analyst Savanthi Syth upgraded the regional airline to outperform from market perform with a price target at $55. Her target signals an upside of 32.9% from Wednesday's close. "While SKYW is one of the best performing airlines stocks YTD … this reflects a meaningfully improved fundamental position relative to the beginning of the year with the successful pass through to partners of materially higher pilot costs and the stabilization of captain supply trends," Syth said in a note to clients Thursday. The stock has already soared more than 150% this year, while airlines encompassing Raymond James' coverage universe have gained about just 14%. Shares climbed 2.7% in premarket trading Thursday. SKYW YTD mountain SkyWest, year to date Pilot attrition trends have been improving for the Utah-based airline since the first quarter of this year. SkyWest has also been able to get partners to absorb costs related to higher rates. Syth added that mainline capacity growth for 2024 is trending lower than previously expected due to supply chain challenges, demand plateaus and rising fuel costs. That can further help mitigate the challenge of finding enough captains as target levels are reset in the next 12 to 18 months, she added. Revenue drags seen in 2023 could turn to benefits in 2024, she also said. SkyWest is expected to reach about 55%, 60% and 75% of 2019 levels for core, pre-taxed earnings per seat in 2023, 2024 and 2025, respectively, she said. However, the airline could see upside as captain levels improve, the chart business expands or from market share gains tied to operational performance. Despite reasons for optimism, Syth said share performance could be hurt if the captain supply fix does not go as planned, the charter business sputters or if there's a faster sunset to a fleet than previously thought. — CNBC's Michael Bloom contributed to this report.