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On Monday, UBS analyst Thomas Wadewitz revised the price target for Frontier Group Holdings Inc (NASDAQ: NASDAQ:ULCC) to $3.50, down from the previous $4.00, while maintaining a Neutral rating on the company’s stock. Currently trading at $3.58, the stock has experienced a significant decline of over 50% year-to-date. According to InvestingPro analysis, the company appears to be trading below its Fair Value, though significant challenges remain. InvestingPro has identified 14 key investment tips for ULCC, with several focusing on financial health concerns. Wadewitz noted that Frontier Group reported a loss for the first quarter, with Revenue per Available Seat Mile (RASM) declining in March, likely in the low to mid-teens percentage range. This followed a 19% increase in January and positive results in February. InvestingPro data reveals concerning metrics, including a weak gross profit margin of 7% and a significant debt-to-equity ratio of 8.4x, suggesting structural challenges beyond seasonal fluctuations.
The company’s performance in March was identified as a low point for the time being, as trends in the last few days of April appeared to be stabilizing. Additionally, there are positive indications for May and early summer bookings. Despite these signs of recovery, Frontier’s weak performance leading up to Easter has set the stage for an anticipated loss in the second quarter, with earnings per share (EPS) expected to be between negative $0.23 and negative $0.37.
Frontier Group anticipates a modest increase in second-quarter RASM, which suggests that the Cost per Available Seat Mile excluding fuel (CASM-ex) could rise by 20-25%. This cost inflation is likely a result of expenses incurred from cutting close-in capacity, as the company has been proactively adjusting its capacity recently.
Wadewitz highlighted that if the stable demand trends observed recently continue into the second quarter, Frontier Group could potentially reach the upper end of its outlook range. However, given the overall uncertainty of the macroeconomic environment and the sensitivity of the second half of the year’s outlook to economic conditions, the analyst expects the stock to remain volatile but range-bound until more clarity emerges regarding the economic backdrop. InvestingPro’s Financial Health Score of 1.7 (labeled as ’WEAK’) supports this cautious outlook, with analyst targets ranging from $3 to $10 per share. For deeper insights into ULCC’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Frontier Group Holdings Inc. reported a net loss of $43 million for the first quarter of 2025, which equates to a loss of $0.19 per share. This result significantly missed the forecasted loss of $0.01 per share. The company’s revenue reached $912 million, falling short of the expected $998.06 million. Despite these financial results, Frontier launched new strategic initiatives, including a revamped loyalty program. The company also announced plans to reduce capacity, aiming to cut costs and capital expenditures by over $300 million. Analysts from firms like Deutsche Bank (ETR:DBKGn) and Raymond (NSE:RYMD) James raised questions about Frontier’s market strategies and future profitability during the earnings call. Frontier anticipates a loss between $0.23 and $0.37 per share for the second quarter of 2025 but expects profitability in the latter half of the year. The company is targeting positive revenue per available seat mile in Q2 and anticipates continued industry capacity moderation.
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