Sell Rating for Spirit Airlines Amidst Competitive and Financial Challenges

Citi analyst Stephen Trent has reiterated their bearish stance on SAVE stock, giving a Sell rating on May 8.

Stephen Trent has given his Sell rating due to a combination of factors impacting Spirit Airlines. The airline is facing a tough competitive landscape, with increased pressure from other discount carriers in key markets such as Florida and Puerto Rico. Additionally, changing consumer preferences are moving away from no-frills options, which is Spirit’s primary offering. Furthermore, the company is dealing with a significant amount of debt, with a reported $6.3 billion in net debt for the first quarter of 2024, coupled with negative free cash flow. These challenges, while not necessarily impossible to overcome, do not paint a promising picture for shareholders at this time.
Moreover, Trent points to structural issues within the discount airline sector, where cost pressures are mounting due to equipment scarcity, rising labor costs, and air traffic control limitations. Unlike larger network carriers, discount airlines like Spirit lack diversified revenue streams that could benefit from current trends, such as increased demand for premium seating and strong loyalty program revenues. With the airline’s debt load and inability to fully capitalize on these trends, it is suggested that a reevaluation of product positioning may be necessary. Reflecting these concerns, Citi has adjusted Spirit’s target price from $3.80 to $3.50, further reinforcing the Sell recommendation.

In another report released on May 8, Susquehanna also maintained a Sell rating on the stock with a $3.00 price target.

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Spirit Airlines (SAVE) Company Description:

Spirit Airlines, Inc. is an airline that offers travel to price-conscious customers. The company’s customers start with an unbundled base fares that remove components included in the price of an airline ticket. The company was founded by Ned Homfeld in 1964 and is headquartered in Miramar, FL.