Why 2 Spirit Airlines Analysts Are No Longer Bullish After Q4 Results

Spirit Airlines Incorporated SAVE shares were trading lower Thursday after the airline landed two Wall Street analyst downgrades.

The Analysts: Vertical Research analyst Darryl Genovesi downgraded Spirit from Buy to Hold and set a $34 price target.

Seaport Global analyst Daniel McKenzie also downgraded Spirit from Buy to Neutral and removed a $31 price target.

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The Thesis: After Spirit shares gained more than 360% off their 52-week lows, there was little indication in the company’s fourth-quarter earnings report that the stock had significant upside from current levels in the near future, Seaport's McKenzie said in a downgrade note. 

“We're walking away from SAVE's 4Q20 earnings release concluding that while 4Q results and a 1Q21 revenue outlook are as we expected, risk/reward is balanced at this point,” the analyst said.

Spirit reported an $8.48 EPS loss in 2020, yet the stock is up from as low as $7 in March 2020 to as high as $33 this month.

Even after projecting in a steep recovery for Spirit in the next two years, McKenzie said the stock is still trading at around 13 times Seaport's 2022 EPS estimate of $2.50 — the high end of its historic valuation range.

Spirit is better-positioned than other major U.S. airlines given its focus on domestic leisure traffic, McKenzie said, adding that he believes it will recover more quickly than international and business travel.

SAVE Price Action: Spirit shares were trading down 8.54% to $29.89 at last check Thursday. 

Benzinga’s Take: All of the airline stocks have bounced back tremendously from their March 2020 lows as investors anticipate a sharp recovery in 2021 and beyond.

The biggest question marks at this point are just how long will it take for airlines to recovery the majority of their 2019 business and how much of that recovery is already priced into the stocks.

Benzinga file photo by Dustin Blitchok.