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Investing.com -- Deutsche Bank raised Southwest Airlines (NYSE:LUV) from Hold to Buy, citing a series of developments expected to enhance shareholder returns and boost financial performance. 

The firm increased its price target for the stock from $28 to $40. The company’s share price is up more than 2% on Thursday, trading around the $33.70 mark.

The upgrade is based on three key drivers. 

“Southwest’s refreshed board of directors (along with Elliott Management) has ushered in a new era of change at the company, which we think will drive higher shareholder returns,” analysts wrote.

Second, the bank emphasized the company’s ongoing transformation. “Current strategic initiatives should drive meaningful revenue and EBIT growth over the next 12 - 24 months,” the note stated, signaling confidence in Southwest’s ability to improve its topline performance and operational efficiency.

Lastly, Deutsche Bank (ETR:DBKGn) highlighted improving returns as a central factor in its bullish outlook. “We think Southwest’s return on invested capital (ROIC) will significantly improve over the next two years,” analysts said.

The note reflects rising investor optimism following the company’s implementation of new initiatives that support its business objectives. In March, Southwest outlined some of those initiatives, with CEO Bob Jordan stating: "We have a tremendous opportunity to meet current and future Customer needs, attract new Customer segments we don’t compete for today, and return to the levels of profitability that both we and our Shareholders expect."

After dropping below the $24 per share mark in April, the stock has gained more than 27% in the last month and is now positive for the year-to-date, albeit by just 0.51%. However, over the last 12 months, it has gained 33.9%.

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