Alaska Airlines Inc. (ALK) saw its stock downgraded to “market perform” from “strong buy” by Raymond James on Monday, following the company’s announcement of its plans to acquire Hawaiian Airlines parent company, Hawaiian Holdings Inc. (HA). The acquisition price is set at $18 a share, representing a significant 270% premium over its closing price on Friday.
Analyst Savanthi Syth mentioned in a note to clients that although the earnings recovery outlook that supported their previous view remains intact, there may be a delay in resuming a dividend, as the acquisition is not expected to close for 12-18 months. Syth also expressed belief in the longer-term benefits of the acquisition, citing Alaska’s strong balance sheet and earnings strength as factors that would see them through.
However, Syth acknowledged the current macro uncertainty and emphasized that the complexity of executing the merger could weigh on sentiment and potentially limit near- to medium-term upside potential. As a result of these developments, Alaska’s stock saw a decline of 11.9%, while Hawaiian’s stock experienced a significant increase of 188.5%.
Overall, despite the downgrade, Alaska Airlines Inc. remains optimistic about the future and is taking strategic steps to position itself for long-term success.