Raymond James Upgrades Allegiant Travel To Outperform On TRASM Outlook, Risk-Reward

In a report published Wednesday, Raymond James analyst Savanthi Syth upgraded the rating on Allegiant Travel Company (NASDAQ: ALGT) from Market Perform to Outperform, while establishing with a price target of $225.Analyst Savanthi Syth said that the The resolution of the pilot backlog issues hads helped Allegiant Travel get back to led to strong capacity growth in April at Allegiant Travel. This growth is expected to accelerate from 17 percent in 2Q15 to 25 percent in 2H15, as the company takes advantage of "low fuel prices and robust leisure demand.," analyst Savanthi Syth mentioned.Syth added that a A closer examination of on the timing of the company's new markets had revealeds that the expected anticipated pressure on the year on year scheduled service TRASM, due to accelerated capacity growth, was now likely to be limited, Syth added.In the report Raymond James noted that, "Thus, despite the acceleration of capacity growth in 2H15, …we are now forecasting TRASM to decline by 8% compared to our prior 12% decline estimate and the ~7% decline in 2Q15."Allegiant Travel's 2016 growth is expected to be driven by the expansion of its leisure destination offering at existing cities rather than the an entry into new cities which tends to boost the costs too. "Moreover, in 2016, the ~2 ppt TRASM drag from the credit card surcharge (which reduced both revenue and cost) should be lapped. Thus, we expect TRASM to decline by ~1% y/y vs. the 6% decline forecasted for 2015," the report added.The EPS estimates for 2015 and 2016 have been raised from $11.25 to $12.00 and from $11.75 to $12.50, respectively, to reflect the improved TRASM outlook.