Imperial Capital Slashes Spirit Airlines Targets, But Still Likes The Stock

In a report published Wednesday, Imperial Capital analyst Bob McAdoo maintained an Outperform rating on Spirit Airlines Incorporated SAVE, while lowering the price target from $100 to $85. The analyst believes that the recent sell-off in the stock offers an attractive opportunity for long-term investors. The analyst believes that the decline in the share price, following the updated operating guidance for 2015 was an overreaction, given that pricing pressures are expected to be short-term to a large extent rather than post a long-term threat to the company's ultra-low cost carrier model. Competitive pricing pressures are expected to decline in the coming months, with the easing of promotional fares. "We continue to view Spirit as one of the few growth stories in the U.S. airline industry, having generated double-digit growth across revenue, EBITDA, and EPS each year since 2007," McAdoo stated. Spirit Airlines is expected to continue to see growth in its passenger numbers, driven by a combination of new markets and new aircraft. The company expects to grow its annual capacity by 30 percent in 2015 and by 20 percent or more annually for the next five years.