It's been a while since I've written on Alaska Air Group (NYSE:ALK) and a lot has changed since then. A company praised and valued for going its own way and sticking to a different plan than many of its rivals is trying to go down the familiar route of growth through M&A. With that, the company is taking on risks tied to the deal approval process, integrating the two businesses, mixing up its fleet, and possibly wrecking the things that made merger target Virgin America (NASDAQ:VA) distinct and popular.
I do think there are valid concerns regarding the Virgin America deal, not to mention ongoing concerns about competitive capacity increases and pressures on yields. Outside of Virgin America, none of these concerns are new, though, and I think management here has earned the benefit of the doubt. I'm taking a cautious view on valuation given the present uncertainties, but Alaska Air still looks at least 10% undervalued on that basis, with more upside that can be driven by solid execution on synergy targets and/or less onerous conditions for deal approval.
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Alaska Air Undervalued On Uncertainty