Stifel Sees Potential For A 20% Return In Allegiant
Allegiant Air parent company Allegiant Travel Company (NASDAQ: ALGT) has been awarded Stifel's highest rating.
The Analyst
Stifel analyst Joseph DeNardi upgraded Allegiant Travel from Hold to Buy and upped the price target from $150 to $200, suggesting roughly 20-percent upside from the $165.50 level at which the stock closed Friday.
The Thesis
Allegiant Travel shares are trading at 13 times Stifel's 2019 earnings per share estimate of $15.50, DeNardi said in a Monday note. (See the analyst's track record here.)
Stifel's estimate incorporates a 2.5-percent total operating unit revenue increase, 1-percent average decline in cost per available seat mile and a $2.15/gallon jet fuel price in 2018 and 2019.
Against this backdrop, the company faces a relatively lower-risk revenue outlook, as 80 percent of its routes are in non-competitive markets, DeNardi said. The analyst projects that Allegiant's ramping revenue initiatives in 2018 — namely improved revenue management and increasing contributions from its co-branded credit card — contributing about 3 points to year-over-year unit revenue.
"An improving revenue outlook combined with lower operational risk and the prospects for compelling cost leverage in 2018/2019 gives us confidence in ALGT's margin profile both relative to its [ultra low cost-carrier] peers and on an absolute basis," DeNardi said.
Allegiant has stronger near-term revenue trends with less downside risk, even if competitive dynamics worsen, DeNardi said. The company also has industry-best CASMx trends, he said.
Price Action
Allegiant Travel is down about 7 percent over the past year.
At the time of writing, Allegiant Travel was rallying 2.48 percent at $169.60.
Related Links:
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What Airport Costs Say About Airlines' Margins, Competitiveness
Latest Ratings for ALGT
Jan 2018 | Stifel Nicolaus | Upgrades | Hold | Buy |
Jan 2018 | Bank of America | Upgrades | Neutral | Buy |
Dec 2017 | Deutsche Bank | Upgrades | Hold | Buy |
View More Analyst Ratings for ALGT
View the Latest Analyst Ratings
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