On Friday, Raymond James made adjustments to its financial outlook for Allegiant Travel Company (NASDAQ:ALGT) shares, reducing the price target to $68 from the previous $71 while maintaining an Outperform rating.
The firm cited Allegiant's 2024 earnings forecast as very weak, acknowledging that their projections are below the consensus, indicating near-term risks for the company.
The Outperform rating remains unchanged due to the anticipation of a recovery in earnings by 2025. This optimism is based on the belief in the long-term profitability of Allegiant's ultra-low-cost carrier (ULCC) model and the potential benefits from corrective actions that are currently underway.
These actions, however, are not entirely within the company's control, as they depend on external factors such as pilot agreement to an amended contract, Navitaire's system enhancements, and regulatory approvals.
The analyst noted that Allegiant's version of the Boeing (NYSE:BA) MAX-8-200 aircraft is awaiting Federal Aviation Administration (FAA) sign-off before deliveries can commence. This step is crucial for the company's strategy to expand its fleet from approximately 125 to over 200 aircraft in the coming years.
Additionally, Raymond James pointed to potential upside from Allegiant's revenue initiatives. These include leveraging Navitaire's capabilities, introducing Allegiant Extra, transitioning from MasterCard to Visa (NYSE:V), and establishing a joint venture in Mexico. These initiatives are expected to contribute to the company's revenue growth and support the fleet expansion strategy.
The report concluded with a focus on the company's long-term prospects, suggesting that despite the weaker outlook for 2024, there are several positive factors that could drive Allegiant's performance in the following years.
In other recent news, Allegiant Travel Company has experienced a series of developments. The company's Chief Information Officer, Robert P. Wilson III, is set to retire in July after significantly shaping the company's information technology landscape. Allegiant is in the process of selecting a successor to continue the company's technological advancements.
On the financial front, Allegiant reported a challenging first quarter in 2024, with a decline in operating income due to increased expenses. Despite these challenges, the company expressed optimism about its ability to return to industry-leading profitability.
Additionally, the company reported a drop in its April passenger traffic, with key performance metrics such as the number of passengers and revenue passenger miles showing a decline compared to the previous year.
In a recent development, the U.S. Treasury Department announced its intention to sell warrants it holds in various U.S. airlines, including Allegiant, aiming to gather a minimum of $492 million. Allegiant's warrants are set at a minimum of $50,000. This is part of a repayment plan for COVID-19 relief aid given to the airlines.
From the analyst's perspective, TD Cowen adjusted its outlook on Allegiant, reducing the price target from $65.00 to $60.00, while maintaining a Hold rating. This revision reflects the latest financial data and management's comments on future expectations. These recent developments provide investors with an updated snapshot of Allegiant's performance and outlook.
InvestingPro Insights
As Raymond James adjusts its outlook on Allegiant Travel Company (NASDAQ:ALGT), a glance at real-time data from InvestingPro provides additional context for investors. Allegiant is currently operating with a market capitalization of approximately $876.13 million and a price-to-earnings (P/E) ratio of 15.66, which adjusts to a more attractive 10.32 when looking at the last twelve months as of Q1 2024. Despite a slight revenue growth of 2.66% over the last twelve months, the company's stock price has experienced significant volatility, trading near its 52-week low and reflecting a one-year price total return of -59.19%.
InvestingPro Tips highlight several challenges, including Allegiant's significant debt burden and a cash burn that investors should monitor closely. Additionally, the company's stock price movements have been quite volatile, which may be a concern for risk-averse investors. On a positive note, analysts predict that Allegiant will be profitable this year, with profitability sustained over the last twelve months. For those considering a deeper dive into Allegiant's financial health and future outlook, InvestingPro offers 12 additional tips to guide investment decisions. To access these insights and more, visit https://www.investing.com/pro/ALGT and use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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