On Monday, Citi reaffirmed its Sell rating on Spirit Airlines (NYSE:) with a steady price target of $4.00. The firm’s stance remains unchanged despite the airline’s recent announcement about receiving compensation from Pratt & Whitney for aircraft groundings. The compensation, potentially totaling up to $200 million, is viewed as insufficient to offset the airline’s maintenance expenses from 2023, which amounted to $223 million.
The airline, traded on the New York Stock Exchange under the ticker NYSE:SAVE, has not altered its 2024 guidance following the compensation news. Citi’s analysis suggests that the financial benefit from Pratt & Whitney does not substantially alter the carrier’s financial outlook for the year ahead.
Spirit Airlines’ situation reflects a complex financial landscape where the compensation received does not fully cover the previous year’s maintenance costs. The carrier’s financial guidance for 2024 remains intact, indicating no significant impact from the current compensation agreement on future operations or financial planning.
The airline industry continues to face a dynamic environment, and Spirit Airlines is no exception. Citi’s reiteration of its Sell rating and $4.00 price target on the airline’s shares reflects a cautious outlook on the company’s financial performance despite the recent development with Pratt & Whitney.
InvestingPro Insights
In light of Citi’s Sell rating on Spirit Airlines, it’s valuable to consider additional insights from InvestingPro. Notably, Spirit operates with a significant debt burden and may have trouble making interest payments on its debt, which are critical factors for investors to monitor. Moreover, the airline’s stock has experienced high price volatility, a pattern that could continue in the near term.
From a valuation standpoint, Spirit Airlines is currently trading at a low Price / Book multiple of 0.47, potentially indicating that the stock is undervalued relative to its book value. However, this must be weighed against the company’s financial performance, where recent data shows a Price Total Return of -69.35% over the last year, highlighting a steep decline in the stock’s price.
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