Here's Why Credit Suisse Is Bullish On Spirit Airlines

Julie Yates of Credit Suisse on Friday initiated coverage of

with an Outperform rating and $100 price target as the company is still early in the growth phase with plenty of runway. Spirit Airlines' strategy is to attract the price-conscious traveler by offering fares that are 30 percent to 40 percent below other airlines through its industry-leading ultra-low cost structure that also enables the company to realize industry-leading margins at the same time. Yates notes that the company prefers load factor to yield, stimulating volumes and fees through lower fares with ancillaries now representing 40 percent of revenue. The analyst adds that margins could expand even with negative yield growth, an "unlikely dynamic" at larger carriers. Yates also states that Spirit Airlines is "well ahead" of its 15 percent to 17 percent long-term margin target. The analyst is forecasting EBIT margins in 2015 will be 28 percent assuming total unit revenues fall 6.3 percent and non-fuel unit costs decline 7.1 percent. Bottom line, Spirit Airlines has the highest growth profile among U.S. airlines and its low-fare, ultra low cost structure generates not only the highest margins but shareholder returns in the industry.