Allegiant Travel (NASDAQ:ALGT) was lifted to Buy from Hold at Deutsche Bank, with its price target raised to $145 from $110 in a note Thursday, while SkyWest (NASDAQ:SKYW) was raised to Buy with its price target increased to $46 from $19 per share.
The firm's analysts noted that ALGT and SKYW were upgraded due to an improving return on invested capital.
"In conjunction with the release of the 2023 edition of our Value Creation Primer, we are raising our ratings on the shares of Allegiant (ALGT) and SkyWest (SKYW) from Hold to Buy based on what we think will be a significant improvement in both companies' return on invested capital (ROIC) over the next 2 – 3 years," the analysts wrote
"For 2022, both airlines produced a ROIC that was middle of the pack and margins that were only slightly better than average among our coverage universe of 13 US airlines. However, we think both carriers could meaningfully outperform the industry in ROIC improvement for 2023 – 2025 driven by factors unique and relatively impactful to each airline," they added.
The analysts concluded that his firm believes both firms are currently set up well for outsized share price performance.