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Spirit Airlines (NYSE: SAVE) is an ultra-low-cost American carrier that operates scheduled flights within the U.S., the Caribbean and Latin America. COVID-19 brought the tourism sector to a grinding halt, but SAVE has performed better than other airline stocks. As COVID-19 restrictions are being lifted and the outlook is more benign, SAVE shines as a bright spot in the airline industry.
As global travel recovers, you are probably wondering if now is a good time to add a U.S.-based airline to your portfolio. SAVE will increase your exposure to airline stocks and may help your portfolio withstand external shocks such as COVID-19. SAVE is likely to experience revenue growth due to the gradual reopening of the Latin American countries that contain some of its biggest customers. This article analyzes SAVE and illustrates the rationale for its future share price. Good arguments exist for holding SAVE, but entry and exit points ultimately determine your earnings and overall implications to your portfolio.
At the beginning of 2021, the majority of airline stocks trended down. SAVE performed poorly at the start of the year but regained some of its earlier losses during the second half. SAVE stock has traded between $15.45 and $40.77 in the last 52 weeks, which illustrates the volatility from the COVID-19 pandemic. Its daily range suggests the stock is more stable, trading between $25.42 to $26.51.
In the past 6 months as the uncertainty from COVID-19 continued to impact the travel sector, SAVE maintained a steady downtrend, falling from $37.67 to $26.32 in October 2021. However, the last month, which has included a steady reopening in the U.S., higher vaccine rates and a gradual resumption of travel activity in the U.S. and Latin America, its shares rose close to 13%. Although its revenues actually shrank in the last year, dropping by 23%, the stock has returned close to 65% in the last year, beating the market. These returns are better than others in the travel sector.
Total revenues grew by 520.31% year-on-year in 2 quarters of 2021 in comparison to its competitors such as American Airlines (NASDAQ: AAL) and United Airlines (NASDAQ: UAL) whose average revenue growth stood at 309.49%.
American Airlines has mostly traded in the $20.31 to $21.01 range, while its 52-week range has been more volatile, ranging between $10.63 to $26.09. Meanwhile, United Airlines has been trending downwards, mimicking the broader industry before recovering by $7 in the last month. In the same period, SAVE stock price has risen by about 6%, in spite of strong revenue growth. Conversely, SAVE performed noticeably better than Delta Air Lines (NYSE: DAL) and Southwest Airlines (NYSE: LUV), which fell by 12% and 17% in the last month. This price action illustrates the presence of sound fundamentals and the fact that SAVE has expanded its routes across the U.S. and grown its revenue in spite of the pandemic.
The tourism sector and air travel is reopening in the U.S, which will provide some structural support to SAVE. With vaccination rates rising, tourism, entertainment and business can return to some form of normalcy. The Centre for Disease Control and Prevention notes that U.S. vaccination rates currently stand at 56%. Although guidance for foreign travel into Latin America is changing and reflects a higher number of cases, travel is permitted provided that individuals present a negative COVID-19 test. Even so, the travel sector will likely be subject to additional restrictions for travelers, but companies such as Spirit Airlines and Latin American carriers such as American Airlines added new destinations in spite of the pandemic.
So far, SAVE has outperformed a number of industry peers with no reason for this trend to reverse in the medium term. Added to the higher rates of vaccination and gradual reopening across North and South America, SAVE could benefit from the euphoria surrounding the post-COVID recovery and a strong business model that has seen it expand across 9 destinations. It expects to grow to 31 new non-stop options, allowing the carrier to serve 20 markets in the U.S. and internationally. SAVE launched a new service in Miami International Airport (MIA), with a stream of signature yellow planes that will boost its brand awareness as it expands to 9 new destinations.
Spirit Airlines was recently in the news as one of its jet engines caught fire after a bird flew into it. Meanwhile, JP Morgan (NYSE: JPM) downgrades SAVE to neutral and lowers its price target to $34.
In spite of the uncertainty surrounding its recent fire, its recent expansion will provide some medium term support to the stock, and flexibility across these destinations present a unique opportunity for its revenues to rise in the next earnings call.
The next earnings report is definitely a must-watch as it will provide useful information on the impact of the recent expansion across the U.S. and Latin America. As the industry has suffered from lockdowns, it will be interesting to see how sales and new destinations impact revenue growth. Although overall profits are likely to stay muted, revenues will illustrate the success of its additional destinations.
Given SAVE’s bright prospects, it may be a good idea to buy the stock and increase your exposure to travel while awaiting better dividend payouts as its new destinations become busier. If you are looking to buy and hold, a market order is fine for you. However, if you are buying SAVE as a shorter-term trade, you probably want to use a limit order, and time your purchase after its next earnings call, subject to an improvement in revenue. The easiest way to purchase stocks online is by using a broker. In the list below, Benzinga provides a list of brokers as well as the fees it charges, sparing you hours of online research.
The brokerage comparison table shows you which brokers allow you to buy, sell and hold SAVE stock in your portfolio.
A quick look at the monthly pattern supports the thesis of SAVE breaking a new bullish pattern. A bullish trend is contingent on travel resuming across its major destinations and the new routes SAVE announced. What is interesting is that falling volumes have not immediately caused a bearish bias, and some range trading is expected between $26.31 and $27.50. A new breakout pattern above $27 will set a new floor for the stock price, and any reversals will likely reflect previous trends, leaving the stock to trade between $25.34 and $25.39.
Screenshot taken from Benzinga Pro on 7-10-2021
SAVE is a bright spot in the airline sector. It has shown strong revenue growth and has outperformed the broader market and its peers. Its new routes and schedule indicate that revenues will likely grow as the pandemic abates and vaccination rates rise. For more information on SAVE, head over to Benzinga for market-leading analysis, news and much more.
You can purchase shares of Spirit Airlines (NYSE: SAVE) through any online brokerage.
The latest price target for Spirit Airlines (NYSE: SAVE) was reported by Goldman Sachs on October 6, 2021. The analyst firm set a price target for 28.00 expecting SAVE to rise to within 12 months (a possible 22.91% upside). 16 analyst firms have reported ratings in the last year.
The stock price for Spirit Airlines (NYSE: SAVE) is $22.78 last updated Tue Oct 26 2021 19:59:57 GMT+0000 (Coordinated Universal Time).
There are no upcoming dividends for Spirit Airlines.
Spirit Airlines’s $Q3 earnings are confirmed for after-market on $November 9, 2021.
There is no upcoming split for Spirit Airlines.
Spirit Airlines is in the Consumer Discretionary sector and Multiline Retail industry. They are listed on the NYSE.