BofA warns Fed risks policy mistake with early rate cuts
On Wednesday, Goldman Sachs reiterated a Neutral rating for Allegiant Travel Company (NASDAQ:ALGT) with a set price target of $56.00. The $902 million market cap airline, which has seen its stock decline 47.5% year-to-date, surpassed the expected Mar Q earnings per share (EPS) with a reported $1.81, ahead of the FactSet consensus and Goldman Sachs estimate of $1.54 and $1.60, respectively. The higher-than-anticipated earnings were primarily attributed to reduced non-fuel costs. According to InvestingPro data, the company maintains a relatively high beta of 1.77, indicating significant stock price sensitivity to market movements.
Despite this positive outcome, Allegiant has provided guidance for the June quarter with an EPS ranging from break-even to $1.00. This forecast falls significantly below the consensus and Goldman Sachs’ expectations of $1.85 and $1.52, respectively. InvestingPro analysis reveals that 8 analysts have recently revised their earnings downward for the upcoming period, while the platform’s data suggests net income growth is still expected this year. In response to the uncertain economic environment and its potential effects on demand, Allegiant has also withdrawn its fiscal year 2025 airline-only EPS guidance of $7.75 to $10.25, which was initially announced in February.
Allegiant is reportedly experiencing strong demand during peak travel periods, but the demand during off-peak times has been weaker than anticipated. Nonetheless, the company anticipates remaining profitable in 2025, leveraging its lower utilization business model that allows for adjusting capacity during slower periods and optimizing for peak travel times.
Recent trends have shown a stabilization in booking patterns, with management noting early signs of improvement in reservations over the past several days. Despite these encouraging signs, Goldman Sachs has adjusted its fiscal year 2025 EPS estimate for Allegiant downward due to less favorable revenue trends and increased losses at Sunseeker, a resort development by Allegiant.
The $56 price target suggested by Goldman Sachs represents a 13% potential increase from current stock levels. The firm also mentions that the stocks they rate as Buy typically show an average upside of around 30%, reaffirming their Neutral stance on Allegiant shares. InvestingPro analysis indicates the stock is currently slightly undervalued, with a concerning current ratio of 0.78, suggesting potential liquidity challenges. For deeper insights into Allegiant’s financial health and detailed valuation metrics, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Allegiant Travel Company reported its Q1 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $1.81, compared to the forecasted $1.70. Despite slightly missing revenue expectations, with $699.1 million against a forecast of $701.23 million, the company demonstrated strong performance with a net income of $33.4 million. The airline segment alone contributed $39 million to net income, highlighting the strength of Allegiant’s core operations. Allegiant’s focus on cost management and strategic fleet adjustments were emphasized as key factors in its performance, with a 14% increase in capacity and a 3 percentage point rise in operating margin. The company also reported a record number of passengers for the quarter, showcasing strong demand for leisure travel. Looking ahead, Allegiant projects a Q2 operating margin of around 7% and an EPS of $0.50, with plans to reduce capital expenditures for 2025 to $435 million. Additionally, the company remains vigilant and flexible with capacity adjustments to optimize margins.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.