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Buckingham Expects Allegiant To Soar In Second Half Of 2018

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Buckingham Expects Allegiant To Soar In Second Half Of 2018

Before Thursday, Allegiant Travel Company (NASDAQ: 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. 

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Photo by Alec Wilson via Wikimedia. 

Latest Ratings for ALGT

DateFirmActionFromTo
Dec 2020Morgan StanleyMaintainsOverweight
Dec 2020Deutsche bankDowngradesBuyHold
Nov 2020Raymond JamesMaintainsStrong Buy

View More Analyst Ratings for ALGT
View the Latest Analyst Ratings

 

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