Citi arrives at its $67 target price by applying a ca. 10.5x target multiple to ‘26E EPS.  This reflects a ca. 7% premium to the stock’s historical pre-COVID forward 12M P/E of 9.8x.  In light of Alaska Air's post-Hawaiian merger synergy potential and its strong post-pandemic earnings quality, this small premium seems very reasonable, in our view.

Key risks facing Alaska Air include: (A) demand pressure, which could result from economic contractions, war, national emergencies and the like; (B) acts of nature, such as disease outbreaks, extreme weather events or volcanic eruptions; (C) supply risks, such as lack of access to aircraft, labor, jet fuel; (D) fuel spikes; and (E) unexpected challenges in integrating Hawaiian Airlines. If the impact on the company from any of these factors proves to be more negative than we anticipate, the stock will likely have difficulty achieving our financial and price targets. Likewise, if any of these factors proves to have less of an effect than we anticipate, the stock could materially outperform our target.