TD Cowen analyst Helane Becker maintained a Hold rating on Frontier Group Holdings (ULCC – Research Report) on May 2 and set a price target of $6.50.
Helane Becker has given his Hold rating due to a combination of factors surrounding Frontier Group Holdings’ financial performance and strategic initiatives. Frontier reported a narrower loss than anticipated and a modest increase in revenue, demonstrating some financial resilience. However, their operational loss was larger compared to the previous year, and a decline in traffic as they transition from a hub-and-spoke model to an out-and-back strategy, which affects volume, has been noted. Becker acknowledges the airline’s efforts to restructure its network, which are expected to lead to cost efficiencies, but these have not yet translated into bottom-line improvement.
Further influencing the Hold rating is the increase in various operating expenses, including fuel, labor, aircraft rent, and station operations, which put pressure on the company’s profitability. Even though Frontier is expanding its fleet and forecasting capacity growth, these factors combined with a load factor significantly below previous quarters suggest a cautious outlook. The anticipated savings from a reduction in multi-day crew trips and a focus on yield over volume are positive steps, but it seems Becker requires more evidence of their financial impact before considering a more favorable rating. Becker’s analysis, therefore, supports the Hold rating, with an eye on Frontier’s future ability to translate strategic changes into stronger financial results.
ULCC’s price has also changed dramatically for the past six months – from $3.640 to $5.940, which is a 63.19% increase.
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Frontier Group Holdings (ULCC) Company Description:
Frontier Group Holdings Inc is an ultra-low-cost carrier. It offers flights throughout the United States and to select international destinations in Mexico and the Caribbean. The company’s business model is based on its unique Low Fares Done Right strategy. Frontier Group operates a fleet of over 60 narrow-body Airbus A320 family aircraft.
