On Wednesday, Barclays reinstated coverage on Spirit Airlines (NYSE:SAVE), assigning the stock an Underweight rating with a price target of $4.00. The firm highlighted several challenges facing the airline, which are expected to impact its financial performance and stock potential over the next year.
"Spirit faces significant operating and financial headwinds in the coming year that are likely to limit equity upside," said the analyst.
Among these challenges, the airline is dealing with increased financial leverage and continuous operating losses. These issues are further exacerbated by groundings related to GTF engine problems.
InvestingPro Insights
Recent data from InvestingPro illustrates some of the financial difficulties that Spirit Airlines (NYSE:SAVE) is facing. With a negative Price/Earnings (P/E) ratio of -1.34 for the last twelve months as of Q4 2023, the company's earnings are not covering its share price, indicating that investors are concerned about the company's profitability. This aligns with one of the InvestingPro Tips, which points out that analysts do not anticipate the company will be profitable this year.
Despite these challenges, Spirit Airlines is trading at a low Price / Book multiple of 0.45 as of Q4 2023, suggesting that the stock may be undervalued relative to the company’s book value. This could be a point of interest for value investors, as highlighted by another InvestingPro Tip.
Moreover, the airline's significant dividend yield of 25.86% as of the latest data could be attractive to income-seeking shareholders. However, given the company’s financial headwinds, investors should be cautious and consider the sustainability of such high dividend payments in the long term.
For those looking to delve deeper into the financial metrics and potential investment strategies for Spirit Airlines, InvestingPro offers additional insights and tips. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription and access the full suite of InvestingPro Tips, which currently lists a total of 6 additional tips for SAVE. Visit InvestingPro for Spirit Airlines for more detailed analysis.
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