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Bear of the Day: Spirit Airlines, Inc. (SAVE)

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The travel industry has been hit hard during the coronavirus and even though the airline industry’s outlook is slowly improving, investors might want to wait for stronger signs of a comeback before they buy airline stocks. This brings us to why Spirit Airlines, Inc. (SAVE - Free Report) is Friday’s Bear of the Day.

Turbulent Times…

Spirit is a low-cost airline with destinations throughout the U.S., the Caribbean, and Latin America. The company’s sales fell nearly 10% in the first quarter, as the pandemic abruptly brought the industry to as near a halt a possible, starting in March. Spirit’s second quarter revenue then tumbled 86%, as people cut back on everything but the most essential of air travel.

SAVE reported an adjusted loss of -$3.59 per share for the three-month period ended on June 30. This came in far worse than our estimate and marked a sharp drop from the year-ago period’s +$1.69.

Clearly, there was nothing that Spirit or any of the airlines from United (UAL - Free Report) to Southwest (LUV - Free Report) could do amid this unprecedented situation. But investors can’t worry about that, and instead should look to reports that predict traffic might not fully recover until 2024.

 

 

 

 

 

 

 

 

 

 

 

 

What’s Next?

SAVE shares have jumped 64% off their March lows, which falls slightly behind its industry’s 70%. This might sound like an encouraging sign, but the stock is down 5% in the past three months, against the Air Travel market’s 33% climb and the broader Transportation industry’s 20%.

Spirit closed regular trading Thursday at $16.38 per share, down 64% from the 52-week highs it hit in February. And investors can also see that SAVE shares were trending in the wrong direction before the Covid-selloff.

Zacks estimates call for Spirit’s Q3 revenue to sink 63% from the year-ago period and 43% in the fourth quarter. Meanwhile, its full-year FY20 revenue is expected to fall 52%.

Bottom Line

Spirit’s earnings revisions have trended in the wrong direction. This helps it hold a Zacks Rank #5 (Strong Sell) at the moment. And the Transportation – Airline space rests in the bottom 10% of our over 250 Zacks industries.

On the positive side, SAVE’s FY21 revenue is projected to surge 73% above our current year-estimate, which clearly means that the appetite for air travel is expected to heat up in a big way. But investors might want to hold off on Spirit.

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United Airlines Holdings Inc (UAL) - free report >>

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Southwest Airlines Co. (LUV) - free report >>