Challenges Ahead for Spirit Airlines: Is It a Sell at $4?
Spirit Airlines faces challenges
The budget airline's cash outflows and lack of earnings, combined with its debt burden, are pressuring the stock. A Barclays analyst recently reinstated coverage of Spirit Airlines (NYSE: SAVE) and slapped a $4 price target on it with an 'underweight' rating. To put that figure into perspective, it was more than 17% lower than the share price at the time of writing.
Engine issues don't help
A slowing economy and rising costs put pressure on budget airlines, and Spirit also has an issue with its all-Airbus fleet. The need to ground Airbus planes using some Pratt & Whitney geared turbofan (GTF) engines hit Spirit operationally and financially, leading it to an even more precarious debt profile. If it all goes wrong, the aircraft can be sold, and debtholders usually take precedence over equity investors in a bankruptcy.
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