Spirit Airlines Analyst: Q4 Guidance 'Refreshingly Differentiated'

Spirit Airlines, Inc. (SAVE) reported third-quarter results on Wednesday, October 28, along with a "refreshingly differentiated" outlook for the fourth quarter, according to JPMorgan (JPM). Analyst Jamie Baker upgraded Spirit Airlines from Neutral to Overweight, with a price target lifted from $19 to $25.

The Thesis

Spirit's fourth-quarter outlook implies operating revenue will be down 43% to 45% year-over-year versus Baker's prior estimates of down 53%, the analyst said in a Friday upgrade note. This "welcomed, less-dire" outlook more than offsets management's guidance for slightly higher operating costs versus expectations, he said. 

JPMorgan raised its EPS estimate from a $1.92 loss to a $1.27 loss, making Spirit the only airline for which the sell-side firm improved its fourth-quarter outlook, Baker said. The research firm also revised its 2020 liquidity forecast from $1.4 billion to $1.9 billion. This does not factor in potential proceeds from the CARES loan and is based on cash burn of $2.3 million a day, the analyst said. 

Finally, Spirit's product offering and lack of any meaningful exposure to international markets implies the company is operating from an advantageous position versus its peers when measured by an eventual return to profit, according to JPMorgan. 

SAVE Price Action

Shares of Spirit Airlines gained 3.11% in Friday's session, closing at $17.57. 

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