SAVE stock price forecast: is Spirit Airlines a contrarian buy?

By:
on Mar 5, 2024
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  • Spirit Airlines shares have collapsed by over 60% this year.
  • JetBlue terminated its merger agreement with Spirit on Monday.
  • There are serious concerns about its 2025 and 2026 maturities.

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The Sprit Airlines (NYSE: SAVE) stock price has been slammed in the past few weeks as investors remain concerned about its bankruptcy risks. It has collapsed to $5.76, 65% below its highest point this year and by 90% from its December 2018 high. 

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Bankruptcy risks remain

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The biggest aviation news this week was the decision by JetBlue to officially terminate its offer for Spirit Airlines.

This termination happened a few weeks after a judge blocked the deal noting that it would lead to stiff competition. By ending the deal, JetBlue decided not to appeal the ruling.

Therefore, there is an elevated risks that the company will ultimately file for bankruptcy because of its substantial 2025 and 2026 maturities. The most recent 10Q showed that the company is set to pay billions of dollars in the next two years. 

Its 2025 maturity stands at about $1.5 billion. Refinancing these maturities in this high-interest rate environment will be tough. Also, it will be quite expensive since it has already been downgraded by Fitch to B- with a negative outlook. Fitch said:

“The company needs to address the September 2025 maturity of its $1.1 billion 8% bonds. Refinancing options are limited given current market sentiment with the bonds currently trading at a steep discount.”

Spirit Airlines is highly indebted. Its short-term debt stands at $315 million while the current portion of lease obligations are over $225 million. It has over $3 billion in long-term debt, which is much higher than its total equity of over $700 million.

Spirit Airlines is also losing substantial sums of money even as demand resumes. It had a net loss of $183.7 million in the last quarter. It has lost over $700 million in the last five quarters. Unlike other airlines, Spirit Airlines revenue in the last quarter dropped by 5% to $1.32 billion. 

Sadly, analysts don’t expect Spirit Airlines to see strong profitability growth. They expect that the company will lose $2.67 per share and $1.42 in 2024 and 2025, respectively. It expects that its capital expenditures will be $325 million.

On the positive side, the company does not have any meaningful maturities this year and has over $1.3 billion in available liquidity. Also, Spirit Airlines was a highly profitable company before the pandemic, meaning that it can get itself out of this hole since fundamentals have not changed dramatically.

SAVE stock price forecast

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SAVE stock

SAVE chart by TradingView

The weekly chart shows that the SAVE stock price has crashed hard in the past few months. It has moved below the important support at $6.36, its lowest level in March 2020. Most notably, it has formed a bearish flag pattern, which is a dangerous sign.

Spirit Airlines stock remains below all moving averages and the lower side of the descending channel is shown in green. Therefore, I suspect that it will continue falling in the coming days as bankruptcy risks remain. This trend could see it crash to the next support point at $3.80, its lowest point this year.

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