The tech bull market might be ongoing but that will be scant consolation for Spirit Airlines (NYSE:SAVE) investors. Primarily due to a federal judge blocking the low-cost carrier’s intended $3.8 billion sale to JetBlue Airways on antitrust grounds, the stock is down by 56% this year.
There was some temporary respite from the bearish sentiment engulfing the company after it delivered better-than-expected Q4 results. Although revenue fell by 5% year-over-year to $1.32 billion, that figure was in-line with Street expectations. At the other end of the scale, adj. EPS of -$1.36 came in ahead of the forecast by $0.05.
The narrower-than-anticipated loss is the harbinger of things to come, according to the company, which signaled it was on track to get back to profitability. Management is confident the current booking patterns indicate the domestic market is in recovery. Coupled with the adjustments the company has implemented, Spirit anticipates an “unprecedented sequential improvement” in total revenue per available seat mile (TRASM) between Q4 to Q1. That should result in positive cash flow beginning in Q2.
Given there have been concerns regarding the company’s ability to keep operating as a standalone entity, Spirit also offered details affirming its sustainability as an independent airline should the merger with JetBlue definitely be off the table.
Deutsche Bank analyst Michael Linenberg believes the company has “sufficient liquidity at present” as it currently stands at $1.3 billion. The results and outlook have led to a change in the analyst’s model, although Linenberg refrains from turning bullish just yet.
“While our revised forecast for FY2024 (i.e., going from a loss per share of $3.25 to $2.50 vs. consensus loss per share of $3.07) is more cautious than the company’s outlook, we are projecting a near breakeven operating margin for the June Q and a positive operating margin for the Sep Q,” the analyst explained. “For now, we are closely following the company’s implementation of several tactical/strategic initiatives while management explores various opportunities to further shore up liquidity. With the JetBlue merger outcome an overhang on the stock, we see the shares as range-bound.”
As such, Linenberg maintained a Hold rating on the stock, backed by a $7 price target, suggesting the shares will gain 9% over the coming months. (To watch Linenberg’s track record, click here)
There are currently no SAVE bulls on Wall Street. With an additional 3 Holds and Sells, each, the stock claims a Moderate Sell consensus rating. Going by the $7.50 average target, a year from now, investors will be sitting on returns of 17%. (See Spirit Airlines stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
