Spirit Air Shares Downgraded To Neutral By JP Morgan

Shares of Spirit Airlines Incorporated SAVE have appreciated 33 percent year to date, beating the S&P, which has risen 2.6 percent, and almost all of its U.S. airline peers.

J.P. Morgan’s Jamie Baker downgraded the rating on the company from Overweight to Neutral, while raising the price target from $51.50 to $52.00.

Shares Up

While pointing out that the company’s assurances of “impending softer and gentler approach have been well received,” Baker mentioned that “assurances need to be followed by execution, whereas management has offered little new and consensus expectations haven’t moved much.”

At the same time, Baker also expressed confidence that management would eventually deliver, and the market seems to have already proven its confidence.

“Spirit’s chart has all the hallmarks of a market waiving a management through while asking little in the way of fundamental improvement,” the analyst stated.

No Changes

Noting that despite intent to move to a gentler business model, the company has not made any changes yet, Baker also mentioned that Spirit Airlines has not made any material alterations to its fare structure or its network footprint.

On the other hand, some of the company’s peers are on the verge of “unveiling de-contented economy products intended to avoid spilling further share to ULCCs.”

“If there's one thing investors learned in 2015, it's that the ULCC model is parasitic in nature and functions most profitably when ignored by struggling competitors. Such is apparently not the case in 2016 or 2017,” the J.P. Morgan report said.