Citi has updated its outlook on Frontier Group Holdings Inc (NASDAQ: ULCC), raising the airline's price target to $7.15 from the previous $4.70.
The firm maintained a Neutral rating on the stock. The adjustment followed a period of notable stock performance for Frontier, which saw a 64% surge in its share price over the past month.
The analyst from Citi noted the price movement was intriguing, especially when compared to Frontier's industry peer JetBlue, which only experienced a 32% increase in the same timeframe. Monday saw Frontier's shares pull back by a mild 1.1%, which contrasted with JetBlue's more significant 6% decline.
This movement occurred in the context of Spirit Airlines (NYSE:SAVE) receiving a two-month extension from its credit card processor, an event that had varying impacts on the share prices of the two competing airlines.
The commentary from Citi highlighted a perceived imbalance in the market's reaction to the news affecting Spirit Airlines, suggesting that JetBlue's share price might be reflecting short-term risks while Frontier's has not. The analyst pointed out the significant overlap in operations between Frontier and JetBlue with Spirit Airlines, which could have implications for their stock performance.
In other recent news, Verizon Communications (NYSE:VZ) is facing opposition from major shareholders of Frontier Communications (OTC:FTRCQ) over the proposed $9.6 billion acquisition deal. Glendon Capital Management and Cerberus Capital Management, significant shareholders of Frontier, believe the purchase price undervalues the company. Meanwhile, New Street Research suggests that Verizon could feasibly offer at least $67 per share.
Turning to Frontier Group Holdings, recent developments include securing a $205 million revolving loan facility, potentially increasing to $500 million, and expanding its aircraft pre-delivery payment financing capacity to approximately $475 million. TD Cowen has maintained a Hold rating on Frontier Group shares, while Citi raised the stock target to $4.70, expressing concerns about the company's high financial leverage. Frontier reported a 1% increase in total revenue to $973 million.
Lastly, Raymond James upgraded Frontier Group's stock from Underperform to Market Perform, citing an anticipated near-term earnings boost due to capacity reductions at competitor Spirit Airlines and positive pricing trends. However, the firm's forecast for the pre-tax margin in the fourth quarter is slightly below consensus.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Frontier Group Holdings Inc's financial position and market performance. The company's market capitalization stands at $1.55 billion, reflecting its current valuation in the market. Frontier's revenue for the last twelve months as of Q2 2024 was $3.61 billion, with a revenue growth of 0.62% in Q2 2024 compared to the previous quarter.
InvestingPro Tips highlight some key aspects of Frontier's financial health. The company is currently operating with a significant debt burden, which aligns with Citi's concerns about potential risks. Additionally, Frontier's stock price movements have been quite volatile, as evidenced by the recent 64% surge mentioned in the article. This volatility is further underscored by the strong returns over various timeframes: 15.17% in the last week, 58.49% in the last month, and 83.78% over the last three months.
Interestingly, while the company has not been profitable over the last twelve months, analysts predict that Frontier will be profitable this year. This optimistic outlook is supported by another InvestingPro Tip indicating that 10 analysts have revised their earnings upwards for the upcoming period.
For investors seeking a more comprehensive analysis, InvestingPro offers 16 additional tips on Frontier Group Holdings Inc, providing a deeper understanding of the company's financial position and market prospects.
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