1 Wall Street analyst lowered Spirit Airlines price target by 25%. Here’s why he’s right:
Spirit’s business is getting worse, not better.
Disastrous news for investors this week Spirit Airlines (get 1.96%) Stocks: Spirit on Monday reported a loss of $1.46 per share in the first quarter, adjusted for one-time items. That’s only a penny worse than Wall Street analysts had expected the loss to be, but it’s still a big loss. As soon as this news was released, TD Cowen analyst Helane Becker lowered her price target on Spirit stock from $4 per share to just $3.
Becker maintained a “hold” rating on the stock, but seeing as her price target suggests Spirit stock will fall another 10% over the next 12 months, investors might be better off just selling the stock.
Is Spirit Airlines stock a sell?
In explaining the price target reduction, Becker explained that Spirit’s first quarter loss was already expected. What management didn’t expect was that sales would only be about $1.3 billion in the second quarter. This is almost the same number as the first quarter.
If this is the way it goes, it will mark Spirit’s fourth consecutive quarter of declining revenue, and possibly its 11th consecutive quarter of losses. This is not a good look for the stock, especially when compared to the strong earnings of its competitors, such as: delta and united airlines Spirit blamed “adverse weather and air traffic control-related delays” and the ongoing grounding of the planes. RTX CorporationLast year’s poor results in the first quarter led to engine manufacturing defects that persisted into the second quarter. It’s harder to explain 11 consecutive quarters of losses.
It seems to me that there are more structural problems.
And it’s not just me. Most analysts predict Spirit will continue to post losses this year, next year and into 2026, according to forecasts compiled by S&P Global Market Intelligence. With Spirit Airlines stock currently worth less than $400 million and struggling with a $6.3 billion net debt load, it’s hard to be optimistic about Spirit.
Even a $3 target price may be too generous for this airline.
Rich Smith has no positions in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines and RTX. The Motley Fool has a disclosure policy.
