The ultra-low-cost airline Spirit Airlines (NYSE: SAVE) has managed to interrupt its notable decline recently, partly finding support from renowned investor and Barstool Sports founder Dave Portnoy.
The impact emerged after Portnoy declared SAVE a ‘mega buy’ on January 18. Since the declaration, the stock experienced a surge of over 60% within 24 hours. Portnoy’s rapid endorsement resulted in unrealized profits of approximately $600,000.
The roller-coaster ride commenced at 11:30 AM on January 18, when Portnoy revealed a significant acquisition of Spirit Airlines shares. However, the market responded with a 20% drop almost immediately after his announcement.
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Undeterred, Portnoy upgraded the stock to a ‘mega buy’ at 12:20 PM on January 18, sparking an almost 60% surge in its value in under 24 hours. At the time of upgrading, SAVE was trading around the $4.30 zone before surging to a high of about $7 within several hours. The backing from Portnoy has seemingly halted the recent decline in Spirit Airlines’ stock, offering a glimmer of hope to investors.
SAVE struggles after merger is halted
Portnoy’s support comes at a crucial time for Spirit Airlines, which experienced a downturn earlier in the week. The anticipated merger with JetBlue, the largest U.S. airline merger in over a decade, was blocked by a federal judge due to antitrust concerns on January 16.
In reaction to the news, SAVE stock plummeted more than 50% in about three days.
Concerning the halted merger, Portnoy expressed disbelief and found it challenging to accept the notion that if Spirit Airlines were confronted with the limited options of either merging with JetBlue or filing for bankruptcy, a judge would step in to prevent the deal from progressing.
In a lawsuit filed in March, the Department of Justice (DOJ) asserted that JetBlue’s acquisition of the budget airline would result in increased fares for numerous passengers. The DOJ contended that the merger would eliminate Spirit and roughly half of all ultra-low-cost airline seats in the industry, leading to higher travel costs.
Despite the setback, Spirit Airlines is optimistic about its forthcoming earnings, foreseeing total revenue exceeding previous expectations. The airline attributes this positive outlook to a robust holiday travel season. Furthermore, an anticipated reduction in fuel costs is poised to alleviate revenue strain, paving the way for enhanced earnings.
In its submission for the 2023 fourth-quarter forecast, Spirit Airlines expected revenue to reach around $1.3 billion. This estimate aligns with the upper range of its earlier forecast, emphasizing the positive influence of robust year-end bookings.
What next for SAVE?
Meanwhile, Wall Street analysts forecast a bullish outlook for SAVE in the coming 12 months. According to TipRanks, analysts project the stock to trade at an average price of $8.33, reflecting a potential 24% increase from the current valuation. The seven analysts place SAVE’s low forecast at $4 and the high estimates at $18, indicating considerable upside potential.
Despite recent market fluctuations, SAVE concluded the week positively, registering a 17% gain within 24 hours to trade at $6.68 by press time.
However, the stock’s recent gains were insufficient to offset the losses incurred in the preceding days, as SAVE witnessed a steep 59% decline in 2024.
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