Buckingham Expects Allegiant To Soar In Second Half Of 2018

Loading...
Loading...

Before Thursday, Allegiant Travel Company ALGT had descended 20 percent from its March high.

Now, after the company reported a significant first-quarter beat, one sell-side analyst finds the valuation attractive.

The Rating

Buckingham Rersearch Group analyst Daniel McKenzie upgraded Allegiant from Neutral to Buy and increased the price target from $165 to $179.

The Thesis

McKenzie estimates revenue will more than offset fuel costs, while non-fuel cost-per-available-seat-miles execution drives earnings-per-share upside for the airline. 

Pricing is expected to improve in the second half of the year on easier comps and continued recovery from a damaging "60 Minutes" segment, the analyst said. 

Bookings suffered in the wake of a mid-April exposé about a “high record of in-flight breakdowns,” but management reported they’ve since recovered, McKenzie said. Buckingham predicts overhang from the story through the summer, with full forward motion after the November retirement of Allegiant’s last, aging MD-80 aircraft.

In the meantime, Allegiant’s 40-to-50-percent sparing ratio is seen to protect against fleet transition risks, while its partnership with Sunseeker Resorts promises earnings upside in 2019 and 2020, according to Buckingham. 

The Sunseeker partnership is forecast by Buckingham to drive an incremental $4.50 in EPS over the next three years and another 60 cents each year thereafter.

Price Action

Allegiant shares were up 9.73 percent at $157.25 at the close Thursday. 

Loading...
Loading...

Related Links:

This Transportation ETF Could Fly In March

'Our Economic Outlook For The Year Is Strong,' Delta CEO Says After Q1 Print

Photo by Alec Wilson via Wikimedia. 

Loading...
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorUpgradesPrice TargetAnalyst RatingsBuckingham ResearchDaniel McKenzie
We simplify the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...