Price Target Adjustment#
Evercore ISI has lowered its price target for Alaska Air Group (NYSE: ALK) from $60 to $55 while keeping an Outperform rating. This adjustment reflects a broader trend, as 11 analysts have recently downgraded their earnings forecasts for the airline.
Financial Performance#
In the first quarter of 2026, Alaska Air reported a pre-tax margin of negative 9%, a decline from negative 4% in the same quarter last year. While unit revenue increased by 3.5%, total unit costs rose by 7%. This increase was driven by a 5% rise in non-fuel costs and a significant 14% jump in fuel costs per gallon, despite a modest 2% growth in capacity.
The airline posted a loss per share of $1.68, which was within its guidance range of negative $1.50 to negative $2.00. The company carries a substantial debt of $6.67 billion, which could be affecting its profit margins. Currently trading at $41.45, the stock is considered undervalued according to Fair Value assessments.
Future Outlook#
For the second quarter, Alaska Air anticipates a 1% increase in capacity, with unit revenue growth expected to be in the high single digits, potentially reaching double digits if pricing remains strong. However, non-fuel unit costs are projected to rise by approximately 8% during this period.
Challenges Ahead#
Alaska Air has reported a net loss for the first quarter of 2026, primarily due to soaring fuel costs and operational challenges. The adjusted loss per share of $1.68 slightly missed the expected $1.65. Total revenue for the quarter was $3.3 billion, aligning with forecasts. In light of rising jet fuel prices, the airline has withdrawn its full-year guidance, citing difficulties in planning due to fluctuating fuel costs, which have varied between $4.45 and $5.15 per gallon. Currently, the airline can only recover about one-third of the increased fuel costs through fare increases, raising concerns about future profitability.