Analyst thinks Spirit Airlines' sell off too harsh
NEW YORK (AP) — An analyst said Monday that investors reacted too harshly to Spirit Airlines' disappointing revenue forecast last week and the selloff has created an opportunity to buy.
Spirit Airlines Inc. lost 15 percent on Friday, the biggest one-day decline since it went public in May of last year. The Florida airline said Thursday that its revenue per available seat mile, which measures how much money the airline makes to fly a passenger a single mile, will fall by between 2.5 percent and 4.5 percent this year. Besides the recent impact of Hurricane Isaac on bookings, Spirit also blamed a tax reprieve in August 2011 for its lower forecast results.
Citi's Stephen Trent called the selloff "a significant overreaction." Trent said he believes investors were "mistakenly perturbed" about a perceived shift in the way the company generates passenger revenue. He thinks the market is making assumptions that the passenger revenue will have a huge impact on earnings for the next two years, but Trent thinks the analysis was hasty and likely won't play out as badly as most currently believe.
He kept his "Buy" rating.
The stock gained 35 cents, or 2.1 percent, to $16.93 in premarket trading Monday. At that level, its shares are up 58 percent from a 52-week low of $10.73 last September. They traded as high as in early May.