Here's Why Investors Should Hold Spirit Airlines (SAVE) Now
Spirit Airlines, Inc. SAVE is gaining from solid air-travel demand and low debt level. However, high capital expenditure is a headwind.
Let's delve deeper.
Factors Working in Favor of SAVE
Owing to an uptick in demand for leisure air travel, consolidated traffic (measured in revenue passenger miles) at Spirit Airlines rose 13.9% in the first nine months of 2023. To serve this increased demand, capacity (measured in available seat miles) expanded 14.5%. Available seat miles are projected to rise 14% in fourth-quarter 2023 from fourth-quarter 2022 actuals.
Operating revenues grew 9.9% year over year on the back of increased flight volume. Passenger revenues, which constitute the bulk of the top line, improved 9.7% in the first nine months of 2023.
The carrier exited third-quarter 2023 with cash and cash equivalents of $1,049 million, well above the current debt of $236 million, implying that it has sufficient cash to meet its current debt obligations.
Factors Ailing SAVE
High capital expenditure may play spoilsport and dent the company's free cash-flow-generating ability. During 2022, capital expenditures were $237.6 million primarily due to the purchase of spare parts. Capex for 2023 is expected to be $245 million.
Zacks Rank & Key Picks
SAVE currently carries a Zacks Rank #3 (Hold).
Investors interested in the Zacks Transportation sector may consider better-ranked stocks like Ryanair Holdings RYAAY and SkyWest SKYW, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
RYAAY is benefiting from buoyant air-traffic scenario post Covid. Traffic grew 11% to 105.4 million during the first half of fiscal 2024. On the back of the robust traffic scenario, RYAAY's profit after tax was €2.18 billion during the first half of fiscal 2024, up 59% year over year. Ryanair expects fiscal 2024 traffic to be183.5 million.
SKYW's fleet modernization efforts are commendable. Initiatives to reward its shareholders also bode well. The Zacks Consensus Estimate for 2024 earnings increased 3.5% in the past 60 days.
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Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
SkyWest, Inc. (SKYW) : Free Stock Analysis Report