Has Allegiant's Sell-Off Provided A Discount To The Stock?

An attractive share price and quality business in a low-competition environment have a BofA Securities analyst bullish on Allegiant Travel Company ALGT.

The Allegiant Analyst: Andrew Didora upgraded the firm’s rating on Allegiant from Neutral to Buy and maintained a $260 price target.

Related Link: Recap: Allegiant Travel Q2 Earnings

The Allegiant Takeaways: Allegiant is trading 30% off its March highs, slashing YTD gains to 1% versus the broader airline group’s 11%, said Didora. The sell-off is overdone and provides a great entry point to buy into the company’s leisure model, said the analyst.

The quality of Allegiant’s leisure model is its differentiating factor from its peers, added Didora.

The company is expected to post $5 EPS for fiscal year 2021, beating consensus expectations of $4.50 and Didora’s expectations of $3.41. This upside stems from Allegiant’s laser focus on unit-cost optimization and expected lower costs of fuel, said the analyst.

Seventy-five percent of the company’s network faces limited competition giving Allegiant a strong footing for the continued recovery of leisure travel, noted DIdora.

Regarding the Sunseeker real-estate development, the company is better positioned to absorb costs now than it was back in 2019, given that net leverage is down to 0.5x from 1.7x, according to the analyst note. While working with a partner is less risky, Didora believes the company’s management will tackle the project alone.

Allegiant is expected to provide an update on Sunseeker at its Aug. 5 investor event.

ALGT Price Action: Allegiant was up 2.25% to $196.23 at last check Thursday.

Related Link: Allegiant Travel (ALGT) is a Top-Ranked Growth Stock: Should You Buy?

Photo: Courtesy of Allegiant