Why Alaska Air Stock Surged 15% Higher This Week

Source The Motley Fool

A business update was the main news powering Alaska Air(NYSE: ALK) stock to a double-digit gain over the past few trading days. During the week, the carrier's shares rose by just over 15% in price, according to data compiled by S&P Global Market Intelligence.

Accelerating into the future

On Tuesday, Alaska unveiled its "Alaska Accelerate" three-year plan to make the airline conglomerate a more important player in the industry. The announcement came not long after the company closed its $1.9 billion acquisition of Hawaiian Airlines in mid-September.

Alaska said the anticipated $500 million in cost synergies from the deal will help it deliver profit margins of 11% to 13%, with per-share earnings climbing to $10 by 2027. Among other business-boosting measures, it will launch a new international gateway from its current primary hub, Seattle-Tacoma International Airport (Sea-Tac). Flights from Sea-Tac are to include nonstop routes to Tokyo and Seoul.

The company also said it will roll out a premium credit card "with industry-leading benefits."

Two pundits weigh in positively

Several professional Alaska-watchers became more bullish on the airline's stock in the wake of the announcement. TD Cowen's Tom Fitzgerald raised his price target to $78 per share from his previous $68, maintaining his buy recommendation as he did so. According to reports, Fitzgerald is so optimistic about Alaska's future that he made it his company's No. 2 top stock pick.

One of his peers also raised his Alaska price target. This was Morgan Stanley analyst Ravi Shanker, who now believes the stock could reach $90 per share; his preceding fair value assessment was $70. Shanker left his overweight (read:buy) recommendation unchanged.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Alaska Air Group. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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