On Tuesday, TD Cowen reaffirmed its Hold rating on shares of Allegiant Travel Company (NASDAQ: NASDAQ:ALGT) and increased the price target to $70.00, up from the previous $50.00.
The adjustment follows the latest guidance from the company, which has shown a quicker than anticipated recovery following the impact of hurricanes at the beginning of the fourth quarter. The stock, currently trading at $84.77, has shown remarkable momentum with a 55% surge over the past six months.
The analyst at TD Cowen noted that Allegiant has been experiencing a stronger close-in holiday demand than management initially expected. This has led to a more positive outlook on the company's revenue metrics, with the total revenue per available seat mile (TRASM) now projected to decline by only 1.5% year-over-year, compared to the previous estimate of a 4.5% decrease. According to InvestingPro data, analysts expect the company to return to profitability this year, despite current challenges.
Furthermore, Allegiant's cost per available seat mile excluding fuel (CASMex) has improved, largely due to a $15 million gain from the sale of CFM engines. This gain has contributed to a more favorable cost structure for the airline. However, InvestingPro analysis reveals some financial health concerns, with short-term obligations exceeding liquid assets and a current ratio of 0.75.
The revised price target of $70.00 is based on 11.5 times the projected earnings per share (EPS) for the year 2025. The Hold rating suggests that while TD Cowen sees potential in Allegiant's stock, it advises investors to maintain their current positions without increasing or decreasing their holdings significantly.
Based on InvestingPro's Fair Value analysis, the stock appears to be trading near its fair value. Investors can access the complete financial health analysis and 10 additional ProTips through InvestingPro.
In other recent news, Allegiant Travel Company has experienced significant updates in its financial outlook. Goldman Sachs (NYSE:GS) has updated Allegiant's December quarter earnings per share (EPS) estimate to $2.15, an increase from the previous estimate of $0.85, attributing this to stronger performance by the airline. However, the firm's 12-month price target for Allegiant remains unchanged at $83.00.
Allegiant also anticipates an increase in Q4 earnings and operating margins, driven by recent booking trends and operational adjustments. The company has revised its December quarter revenue per available seat mile (RASM) forecast to a decrease of 1.5%, an improvement from the previously projected 4.5% drop.
UBS has resumed coverage on Allegiant shares with a neutral rating, citing pressures from lower aircraft utilization and increased staffing costs due to delays in Boeing (NYSE:BA) MAX aircraft deliveries. These factors, along with losses from its Sunseeker resort, are expected to improve in the coming year.
Recent developments also include a decrease in passenger traffic and revenue passenger miles, largely due to the impact of hurricanes. Allegiant's pilots, represented by the Teamsters union, voted in favor of a strike to negotiate better compensation and work conditions, potentially affecting pilot retention and aircraft utilization.
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