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Shares of Allegiant Travel Company (ALGT - Free Report) have not had a good time on the bourses of late, declining in double digits so far this year. The disappointing price performance resulted in ALGT underperforming its industryin the said time frame. Additionally, ALGT’s price performance is unfavorable to that of other industry players like Southwest Airlines Co. (LUV - Free Report) ) and Ryanair Holdings (RYAAY - Free Report) in the same timeframe.
YTD Price Comparison
Image Source: Zacks Investment Research
Given the significant pullback in ALGT’s shares currently, investors might be tempted to snap up the stock. But is this the right time to buy ALGT? Let’s find out.
Headwinds Weighing on ALGT Stock
Allegiant is being hurt by the tariff-induced challenging macroeconomic backdrop. The ongoing economic uncertainties and the resultant reduction in consumer and corporate confidence have the potential to hurt domestic air travel demand. As a result, it becomes difficult to predict near-term demand, leading to the withdrawal of the company’s 2025 guidance.
Production delays at Boeing, due to quality control checks and regulatory reviews by the Federal Aviation Administration, have been hurting the fleet-related plans of most airline companies, and it is no different for ALGT. Delays in aircraft delivery will lead to lower profitability than expected from the addition of these aircraft to ALGT’s existing fleet. Further, ALGT will be burdened with increased maintenance costs for those aircraft that would have otherwise been retired and raised interest costs for funds borrowed for pre-delivery deposits. Delivery delays are also expected to limit capacity growth going forward.
Labor cost increase of 19.2% in 2024 swamped the 20.3% increase in total operating expenses in 2024, despite costs on aircraft fuel decreasing year over year (down 9.8% in 2024). The increase was attributable to deals inked with various labor groups. ALGT expects to continue experiencing increased cost pressure from the labor agreements.
What Do Earnings Estimates Say for ALGT?
In the past 60 days, the Zacks Consensus Estimate for ALGT’s second-quarter and third-quarter 2025 earnings and full-year 2025 earnings have moved south.
Image Source: Zacks Investment Research
Upbeat Air Travel Demand & Fleet Additions Aid ALGT
Improvement in air-travel demand, following the end of the pandemic and normalization of economic activities, bodes well for Allegiant's top line. While air travel demand remains particularly strong on the leisure front, business travel has also made an encouraging comeback. With people taking to the skies, ALGT’s top line increased 6.5% on a year-over-year basis in first-quarter 2025 due to a 6.3% rise in passenger revenues, which accounted for the bulk (88.2%) of the top line. Given this encouraging backdrop, for the second quarter of 2025, capacity (measured in available seat miles or ASMs) (for scheduled service) is expected to increase 15.5% on a year-over-year basis. Total system ASM is projected to gain 15% on a year-over-year basis. The operating margin is expected to be between 6% and 8%.
Allegiant’s fleet-modernization initiatives to cater to the travel demand are encouraging. The inclusion of modern planes in its fleet and the retirement of the old ones aligns with its environmentally-friendly approach. In 2013, ALGT started transitioning its fleet from a mixture of MD-80 aircraft and Boeing 757 aircraft to an all-Airbus fleet, which ended in November 2018. During this period, ALGT witnessed significant improvement in fuel efficiency.
In January 2022, ALGT inked a new purchase agreement with Boeing to purchase 50 newly manufactured 737 MAX aircraft with the option of purchasing up to an additional 80 737 MAX aircraft. This aircraft is likely to burn up to 20% less fuel on a per-passenger basis than the older Airbus A320 aircraft in ALGT’s fleet. ALGT already took delivery of four 737 MAX aircraft in 2024 and four in the first quarter of 2025. Currently, eight more aircraft are anticipated to be delivered in the last three quarters of 2025.
ALGT ended 2024 with 125 (34 A319, 87 A320 and 4 737-8200) planes in its fleet. ALGT ended first-quarter 2025 with 127 (34 A319, 85 A320 and 8 Boeing 737-8200) planes. The company aims to have a fleet size of 126 by the end of second-quarter 2025, 123 by the end of third-quarter 2025 and 122 at 2025-end.
Other Tailwinds Working in Favor of ALGT
ALGT’s liquidity position looks encouraging. The airline ended first-quarter 2025 with cash and cash equivalents of $897.6 million, higher than the current debt level of $266.6 million. This implies that the company has sufficient cash to meet its current debt obligations. Meanwhile, the long-term debt level has decreased to $1.74 billion at the end of first-quarter 2025 from $1.79 billion at first-quarter 2024-end.
A solid balance sheet enables the company to reward shareholders with dividends and share repurchases. As a reflection of its shareholder-friendly stance, ALGT paid out dividends worth $21.9 million and repurchased shares worth $6 million in 2024. During first-quarter 2025, ALGT repurchased shares worth $11.1 million (did not pay any dividends). Such shareholder-friendly initiatives should boost investor confidence and positively impact the bottom line.
Impressive Valuation Picture for ALGT Stock
From a valuation perspective, ALGT is trading at a discount compared to the industry, going by its forward 12-month price-to-sales ratio. The reading is also below its median over the last five years. The company has a Value Score of A.
ALGT P/S Ratio (Forward 12 Months) Vs. Industry
Image Source: Zacks Investment Research
To Conclude
It is understood that ALGT stock is attractively valued, and strong passenger volumes bode well for Allegiant. Efforts to modernize its fleet are praiseworthy as well. Despite these positives, we advise investors not to buy ALGT stock now due to headwinds like high labor costs, Boeing and Airbus-related delivery delays and share price volatility. ALGT is also hurt by tariff-induced economic uncertainties and the resultant reduction in consumer and corporate confidence.
Image: Bigstock
Allegiant Stock Plunges 46.6% YTD: Should You Buy the Dip?
Key Takeaways
Shares of Allegiant Travel Company (ALGT - Free Report) have not had a good time on the bourses of late, declining in double digits so far this year. The disappointing price performance resulted in ALGT underperforming its industryin the said time frame. Additionally, ALGT’s price performance is unfavorable to that of other industry players like Southwest Airlines Co. (LUV - Free Report) ) and Ryanair Holdings (RYAAY - Free Report) in the same timeframe.
YTD Price Comparison
Given the significant pullback in ALGT’s shares currently, investors might be tempted to snap up the stock. But is this the right time to buy ALGT? Let’s find out.
Headwinds Weighing on ALGT Stock
Allegiant is being hurt by the tariff-induced challenging macroeconomic backdrop. The ongoing economic uncertainties and the resultant reduction in consumer and corporate confidence have the potential to hurt domestic air travel demand. As a result, it becomes difficult to predict near-term demand, leading to the withdrawal of the company’s 2025 guidance.
Production delays at Boeing, due to quality control checks and regulatory reviews by the Federal Aviation Administration, have been hurting the fleet-related plans of most airline companies, and it is no different for ALGT. Delays in aircraft delivery will lead to lower profitability than expected from the addition of these aircraft to ALGT’s existing fleet. Further, ALGT will be burdened with increased maintenance costs for those aircraft that would have otherwise been retired and raised interest costs for funds borrowed for pre-delivery deposits. Delivery delays are also expected to limit capacity growth going forward.
Labor cost increase of 19.2% in 2024 swamped the 20.3% increase in total operating expenses in 2024, despite costs on aircraft fuel decreasing year over year (down 9.8% in 2024). The increase was attributable to deals inked with various labor groups. ALGT expects to continue experiencing increased cost pressure from the labor agreements.
What Do Earnings Estimates Say for ALGT?
In the past 60 days, the Zacks Consensus Estimate for ALGT’s second-quarter and third-quarter 2025 earnings and full-year 2025 earnings have moved south.
Upbeat Air Travel Demand & Fleet Additions Aid ALGT
Improvement in air-travel demand, following the end of the pandemic and normalization of economic activities, bodes well for Allegiant's top line. While air travel demand remains particularly strong on the leisure front, business travel has also made an encouraging comeback. With people taking to the skies, ALGT’s top line increased 6.5% on a year-over-year basis in first-quarter 2025 due to a 6.3% rise in passenger revenues, which accounted for the bulk (88.2%) of the top line. Given this encouraging backdrop, for the second quarter of 2025, capacity (measured in available seat miles or ASMs) (for scheduled service) is expected to increase 15.5% on a year-over-year basis. Total system ASM is projected to gain 15% on a year-over-year basis. The operating margin is expected to be between 6% and 8%.
Allegiant’s fleet-modernization initiatives to cater to the travel demand are encouraging. The inclusion of modern planes in its fleet and the retirement of the old ones aligns with its environmentally-friendly approach. In 2013, ALGT started transitioning its fleet from a mixture of MD-80 aircraft and Boeing 757 aircraft to an all-Airbus fleet, which ended in November 2018. During this period, ALGT witnessed significant improvement in fuel efficiency.
In January 2022, ALGT inked a new purchase agreement with Boeing to purchase 50 newly manufactured 737 MAX aircraft with the option of purchasing up to an additional 80 737 MAX aircraft. This aircraft is likely to burn up to 20% less fuel on a per-passenger basis than the older Airbus A320 aircraft in ALGT’s fleet. ALGT already took delivery of four 737 MAX aircraft in 2024 and four in the first quarter of 2025. Currently, eight more aircraft are anticipated to be delivered in the last three quarters of 2025.
ALGT ended 2024 with 125 (34 A319, 87 A320 and 4 737-8200) planes in its fleet. ALGT ended first-quarter 2025 with 127 (34 A319, 85 A320 and 8 Boeing 737-8200) planes. The company aims to have a fleet size of 126 by the end of second-quarter 2025, 123 by the end of third-quarter 2025 and 122 at 2025-end.
Other Tailwinds Working in Favor of ALGT
ALGT’s liquidity position looks encouraging. The airline ended first-quarter 2025 with cash and cash equivalents of $897.6 million, higher than the current debt level of $266.6 million. This implies that the company has sufficient cash to meet its current debt obligations. Meanwhile, the long-term debt level has decreased to $1.74 billion at the end of first-quarter 2025 from $1.79 billion at first-quarter 2024-end.
A solid balance sheet enables the company to reward shareholders with dividends and share repurchases. As a reflection of its shareholder-friendly stance, ALGT paid out dividends worth $21.9 million and repurchased shares worth $6 million in 2024. During first-quarter 2025, ALGT repurchased shares worth $11.1 million (did not pay any dividends). Such shareholder-friendly initiatives should boost investor confidence and positively impact the bottom line.
Impressive Valuation Picture for ALGT Stock
From a valuation perspective, ALGT is trading at a discount compared to the industry, going by its forward 12-month price-to-sales ratio. The reading is also below its median over the last five years. The company has a Value Score of A.
ALGT P/S Ratio (Forward 12 Months) Vs. Industry
To Conclude
It is understood that ALGT stock is attractively valued, and strong passenger volumes bode well for Allegiant. Efforts to modernize its fleet are praiseworthy as well. Despite these positives, we advise investors not to buy ALGT stock now due to headwinds like high labor costs, Boeing and Airbus-related delivery delays and share price volatility. ALGT is also hurt by tariff-induced economic uncertainties and the resultant reduction in consumer and corporate confidence.
We advise investors to wait for a better entry point. For those who already own the stock, it will be prudent to stay invested. The company’s current Zacks Rank #3 (Hold) justifies our analysis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.