On Monday, Citi updated its outlook on Spirit Airlines (NYSE:SAVE), reducing the price target to $2.75 from the previous $3.50 while sustaining a Sell rating on the stock. The firm highlighted concerns over the airline's ability to recover its pre-pandemic earnings level compared to its competitors in the discount carrier sector.
The airline's financial trajectory is under scrutiny as it faces a challenging path ahead. Citi pointed out Spirit Airlines' significant cash burn and its net debt position of $6.3 billion at the end of the first quarter of 2024. These factors contribute to the uncertain prospects for the airline to rebound to its former financial performance.
Spirit Airlines' current financial position indicates that it may encounter difficulties in the near future. The airline's substantial net debt and ongoing cash burn are key considerations that led to the revised price target.
The new price target of $2.75 represents a decrease from the previous target, reflecting the firm's cautious stance on the airline's financial health and market position. The Sell rating remains in place, suggesting that the firm advises investors to be wary of the airline's stock at this time.
Citi's assessment underscores the challenges faced by discount carriers like Spirit Airlines in regaining their pre-pandemic earnings wallet share. The firm's analysis suggests that, relative to its network peers, Spirit Airlines may struggle to navigate through its financial constraints.
In other recent news, Spirit Airlines has faced a challenging financial outlook with BofA Securities and Susquehanna downgrading the company's share price target due to an earnings miss and other market factors. Despite this, the airline has been proactive in refining its financial strategy, extending its revolving credit facility's maturity to September 30, 2026, and adjusting its agreement with U.S. Bank National Association for credit card payment processing until at least December 31, 2025.
Spirit Airlines has also expanded its board of directors with the addition of Richard F. Wallman, a veteran financial expert. The company has released preliminary financial estimates for Q2 2024 and projections for the full year, highlighting its ongoing efforts to navigate a complex market environment.
The U.S. Treasury Department has raised $556.7 million from the sale of warrants in major U.S. airlines, including Spirit Airlines. The airline also faces upcoming debt maturities, with $1.1 billion due in 2025 and $500 million due in 2026, which are under negotiation with creditors.
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