LUV Reports Q3 With Shorts at Record Lows and Street Still Buying

Southwest Airlines reports third-quarter results today, Wednesday, October 22, with the stock outperforming almost every airline peer over the past week while short sellers continue to reduce their positions at the fastest pace in months.

The lending market tells a clear story about shifting conviction. Short interest has fallen 10.5% over the past week and nearly 19% over the past month, landing at 4.4% of free float. Borrow availability has surged to 2,379%, a new 52-week high and more than double the level of 949% recorded as recently as October 13. That means roughly 24 shares are available to borrow for every one currently on loan. Cost to borrow is 0.44%, unchanged in direction and firmly low. The ORTEX short score has eased to 40.3, down from 44.7 on October 13, consistent with a market that was unwinding rather than rebuilding its short case before the print.

Options traders were less relaxed. The put/call ratio is running at 0.92, about 1.6 standard deviations above its 20-day average of 0.80, reflecting more demand for downside protection than the short unwind alone would imply. The 52-week high on the PCR is 1.40, so the reading is elevated without being extreme. The stock closed at $39.88 on Wednesday, up 0.6% on the day and 1.4% on the week. That compares well against the peer group: UAL fell 5.3% on the week, ALK dropped 9.1%, and JBLU and ULCC each shed more than 12%.

The analyst community has been trimming targets without abandoning positive ratings. UBS cut its target from $53 to $52 last week while keeping a Buy, and multiple other firms including TD Cowen and Susquehanna have also nudged numbers lower in recent weeks. The consensus mean target is $49.18, implying roughly 23% upside from the current price. The bull case rests on whether basic economy fares, introduced in 2025, are lifting load factors without eroding revenue, and whether the ongoing assigned seating rollout is proceeding on schedule. Bears point to execution risk in that transition and pressure on close-in fares that could weigh on Q3 yields. The stock trades at about 10 times trailing earnings, modest for an airline recovering its network economics.

The ownership picture carries one notable wrinkle. Elliott Investment Management remains on the Schedule 13D register as an activist filer. Its disclosed stake has fallen from 9.3% to 4.9% as of its last filing in April 2026. Because that position now sits just below the 5% disclosure threshold, any further reduction may never trigger a fresh filing. Schedule 13D/G positions are event-driven disclosures around that threshold; stakes are as last disclosed, and holders dropping below 5% may exit without filing again. On the other side, PRIMECAP and Franklin Templeton have both recently crossed 10% ownership, providing longer-term counterweight. There is also a mechanical overhang on the horizon: ORTEX puts a 65% probability on Southwest being deleted from both the CRSP US Large and CRSP US Mid indices at the December 2026 Quarterly Review, which would require the stock to close above $43.20 to avoid the exit. That review ranks on December 4, with a trade date of December 22.

Today's print is therefore as much a test of the transition story, whether assigned seating and basic economy are delivering on their revenue promise, as it is a verdict on the quarter itself.