Shares hit a new low! Spirit Airlines (SAVE.US) lowers Q2 guidance Analysts warn the company may face "restructuring or bankruptcy risk"
AInvestThursday, Jul 18, 2024 3:40 am ET
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Spirit Airlines (SAVE.US) fell more than 10% on Wednesday, hitting a record low of $2.80 in intraday trading, after the airline reported worse-than-expected losses due to lower revenue and poor pricing in ancillary businesses, disappointing Wall Street analysts and denting investors' confidence.

Spirit Airlines now expects to lose $173m to $160m in the second quarter, down from its previous loss estimate of $145m to $120m, due to lower non-ticket revenues, which are expected to fall to $64 per passenger, from $70 previously, reducing second-quarter revenue to $1.2bn from the previous estimate of $1.32bn to $1.34bn.

After the disheartening news, TD Cowen downgraded the stock to "sell" from "hold," arguing that the stock faces greater downside risk given the oversupply in the leisure market and the financial challenges facing Spirit's core customer base.

"We believe the company will not be profitable until 2026 or later, and the risk of restructuring or bankruptcy is high," said Thomas Fitzgerald, analyst at TD Cowen, who added that the airline has already pledged most of its assets and expects to have more than 70 aircraft in its fleet by 2025.

Bank of America Securities agreed, noting that "Spirit's growth and profitability will have a long way to go to return to historical levels, and the looming debt maturities will only exacerbate the challenge." The firm cut its price target by 15% to $2.75.

The firm also cut its revenue estimates for Spirit over the next three years and expects losses to widen significantly, with an estimated loss of $5.54/share in 2024, up from its previous loss estimate of $3.16/share, and a loss of $1.84/share in the second quarter, and a long-term loss of $1.18/share.

"Given the changes in bundling and the significant decline in revenue, it becomes challenging to forecast Spirit's revenues," said Andrew Didora, analyst at Bank of America.

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