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Cowen Is Upgrading Spirit Airlines; Will It Lift Investors' Spirits, Too?

Cowen Is Upgrading Spirit Airlines; Will It Lift Investors' Spirits, Too?

  • Cowen and Company upgraded Spirit Airlines Incorporated (NASDAQ: SAVE) from Market Perform to Outperform on Friday.
  • The firm established a price target of $60.00.
  • Shares of Spirit Airlines are up more than 2.5 percent on Friday trading.
  • In a report issued Friday, Cowen and Company analysts Helane Becker, Conor Cunningham and Stephen Stone upgraded Spirit Airlines to Outperform, setting a $60 price target.

    They noted the stock’s forward multiple has contracted by 35 percent since the end of last year, even though the Street is expecting to see margins improve.

    According to the research note, the experts believe the multiple contraction was driven by the company's capacity growth rate of more than 30 percent, which scared investors.

    That said, they also think 2015 will be “the peak for capacity growth as Spirit slows its capacity growth rate to 20 percent in 2016.”

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    The sentiment toward the shares has been pretty negative over the past few months, as load factors and price have been feeling some pressure (due to Spirit’s remarkable growth), the experts added. In addition, many believe that in the current low oil prices environment, unit revenue will continue to deteriorate.

    However, the analysts noted, sentiment has likely bottomed. Thus, investors may start seeing some upside soon, since margins are likely to remain around 20 percent, and maturing markets should lead to improving load factors and more stable airfares.

    Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

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