On Wednesday, Citi maintained its Sell rating on shares of Spirit Airlines (NYSE:SAVE) with a price target of $3.50. The firm noted that Spirit's second-quarter guidance update appears negative, pointing out that while ticket revenue met forecasts, non-ticket revenue fell short, leading to some margin drag. Still, a slight relief came from fuel prices, which were two cents per gallon lower than expected, providing a mild offset to the revenue shortfall.
Spirit Airlines indicated that its ticket revenue for the second quarter aligned with the company's expectations. However, the shortfall in non-ticket revenue is expected to impact the company's margins. This financial dynamic is anticipated to place some downward pressure on the shares of Spirit Airlines when the market opens today.
The airline's financial performance was slightly buoyed by lower-than-anticipated fuel costs. The original guidance had been exceeded by a minor margin, as fuel prices came in two pennies per gallon below initial estimates. This small cost saving could help to mitigate the negative effects of the non-ticket revenue miss.
Citi's analysis suggests that these combined factors could result in modest pressure on the stock of Spirit Airlines in today's trading session. Market participants may react to the updated financial guidance and the potential impact on the airline's profitability.
Investors and market watchers will be closely monitoring Spirit Airlines' stock movement following the guidance update and Citi's reiterated Sell rating with the $3.50 price target. The company's financial health and performance remain a focal point, especially in the context of its non-ticket revenue and fuel cost dynamics.
In other recent news, Spirit Airlines has faced a series of financial adjustments due to a revenue shortfall. BofA Securities and Susquehanna have revised their outlooks on Spirit Airlines, reducing their price targets due to a challenging environment and earnings miss.
The airline's revenue shortfall was compounded by lower ancillary revenues and upcoming debt maturities. BofA Securities has significantly decreased its estimated earnings per share for the second quarter and full year of 2024.
Spirit Airlines has also disclosed preliminary financial estimates for Q2 2024 and projections for the full year. The company has expanded its board of directors with the addition of Richard F. Wallman, a veteran financial expert with past roles at Honeywell International Inc (NASDAQ:HON)., IBM (NYSE:IBM), and Chrysler Corporation.
The airline has made strategic financial moves, 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. These are among the recent developments in the company's operations.
InvestingPro Insights
According to recent data from InvestingPro, Spirit Airlines (NYSE:SAVE) is grappling with a challenging financial landscape. The company operates with a significant debt burden and analysts have expressed concerns that it may have trouble making interest payments on its debt. This aligns with Citi's Sell rating and underscores the importance of the airline's revenue and margin performance.
With a market capitalization of $309.34 million and a Price / Book multiple of just 0.35 as of Q1 2024, Spirit Airlines is trading at a low valuation compared to its assets. However, the company's revenue has declined by 3.17% over the last twelve months leading up to Q1 2024, indicating potential headwinds in its business operations.
Moreover, the airline's gross profit margin stands at 13.95%, reflecting the margin drag mentioned by Citi. The company's stock has also experienced a significant price decline over the past year, with a one-year total return of -81.64%, which could be a red flag for investors considering the stock's long-term performance.
For those looking to delve deeper into Spirit Airlines' financials, InvestingPro offers additional tips that can provide valuable insights. With the use of coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. There are 15 more InvestingPro Tips available that could help investors make informed decisions about Spirit Airlines' stock. Visit https://www.investing.com/pro/SAVE for a comprehensive analysis and to take advantage of the discount.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.