Spirit Airlines Shares Plunge on Profit Warning (SAVE)
Shares of Spirit Airlines Inc (NASDAQ: SAVE) slumped on Friday after the company issued a profit warning, citing foreseen plunge in revenue.
The Florida-based Company, which went public in May 2011, said that revenue-per-available seat mile, which is a gauge on how much revenue an airline generates by flying each passenger for a mile, will shrink by 2.5 % to 4.5%. Moreover, the impact of hurricane Issac will also hurt the top-line figures, said Spirit Airlines.
Earlier in August, a congressional face-off resulted in a period when certain state taxes on airline tickets were not imposed; accordingly airline companies, including Spirit Airlines raised the fares equivalent to uncollected taxes, boosting revenue.
Even though the stock felt the heat on Friday as edgy investors offloaded their holdings, analysts are not that concerned about Spirit Airlines’ performance in the future.
Citigroup’s equity strategist, Steven Trent maintained the “buy” rating, citing that company’s fundamentals were still intact. Mr. Trent also pointed out that Spirit reported 19% increase in passenger traffic compared to same period last year.
Maxim Group’s Ray Neidl also retained the “buy” rating, stating that airlines has potential to grow by 20% ever year as it looks to spread out its operations in many emerging markets.
Nevertheless, Raymond James’ analyst, Savanthi Syth keeps a shoddy outlook on the airlines. She lowered Spirit Airlines rating to “Market Perform” from “Outperform,” citing the downwardly revision in unit revenue prediction points towards a weakening booking forecast.
“Moreover, this is the fourth quarter in a row where we and the Street have overestimated Spirit’s profitability and earnings predictability, and it appears that the business may not have the margin expansion opportunity we had previously anticipated,” Syth said in her research note.
Although Syth acknowledged the fact that Spirit Airlines’ margins were among the best in the industry, she believes that investors should wait for the time being.
Shares plunged 15.67% to trade at $16.58 on Friday, the biggest one day fall ever since it started taping capital markets. The Company’s 52 week range is between $10.73 and $24.75.
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Post Written By: Ed Liston
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.
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