On Monday, Citi revised its price target for Frontier Group Holdings Inc (NASDAQ:ULCC) shares, the parent company of Frontier Airlines, from $8.00 to $7.00, while keeping a Neutral rating on the stock. The adjustment comes as the firm incorporates new factors into its forecast for the Denver-based ultra-low-cost carrier.
The updated forecast for Frontier includes improved expected costs per available seat mile (CASM), excluding fuel, and integrates the first quarter of 2024 results into Citi's financial model.
As a result, Citi's earnings per share (EPS) estimates for Frontier have been slightly altered. Previously set at $0.70 for this year, $1.19 for the next year, and $1.64 for 2026, the EPS estimates have been updated to $0.72, $1.22, and $1.69, respectively.
In addition to the EPS revisions, Citi has also reduced the target multiple applied to Frontier's shares. The multiple has been lowered from 10.75 times to 10 times the projected earnings. When this new multiple is applied to the revised 2024 EPS estimates, it results in the reduced target price of $7 per share.
The analyst at Citi noted the adjustments and the rationale behind the new price target, stating, "Forecast adjustments for Neutral/High Risk-rated Frontier Airlines, include the incorporation of slightly better, expected cost per available seat mile or CASM, ex-fuel and 1Q'24 results into our model."
The price target update reflects Citi's latest expectations for Frontier Group Holdings, taking into account the company's recent performance and the updated financial metrics used in their analysis. The maintenance of the Neutral rating indicates that the firm's view on the stock's investment potential remains unchanged despite the revised target price.
InvestingPro Insights
With Frontier Group Holdings Inc (NASDAQ:ULCC) in the spotlight following Citi's revised price target, a closer look at the company's financial health and market performance reveals additional insights. According to InvestingPro data, Frontier has a market capitalization of $1.29 billion and is grappling with a negative P/E ratio of -51.58, reflecting challenges in profitability. Moreover, the company's gross profit margin for the last twelve months as of Q1 2024 stands at 8.96%, highlighting potential concerns about its cost efficiency.
While analysts have revised their earnings upwards for the upcoming period, indicating a potential turnaround, Frontier also operates with a significant debt burden which may affect its ability to make interest payments. The stock has experienced a large price uptick over the last six months, yet it has fared poorly in the past month with a -19.21% return. These fluctuations underscore the volatility mentioned in the InvestingPro Tips, which could be a factor for investors with a lower risk tolerance.
For those considering Frontier's stock, there are 7 additional InvestingPro Tips available that could provide a more comprehensive understanding of the company's financial position and future prospects. To gain further insights and make a well-informed decision, use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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