Advertisement

These Analysts Think Spirit Airlines, Inc.'s (NYSE:SAVE) Earnings Are Under Threat

The analysts covering Spirit Airlines, Inc. (NYSE:SAVE) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. Surprisingly the share price has been buoyant, rising 19% to US$12.51 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

Following the latest downgrade, the current consensus, from the nine analysts covering Spirit Airlines, is for revenues of US$3.2b in 2020, which would reflect a not inconsiderable 16% reduction in Spirit Airlines' sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$3.7b in 2020. It looks like forecasts have become a fair bit less optimistic on Spirit Airlines, given the measurable cut to revenue estimates.

See our latest analysis for Spirit Airlines

NYSE:SAVE Past and Future Earnings April 9th 2020
NYSE:SAVE Past and Future Earnings April 9th 2020

The consensus price target fell 21% to US$23.31, with the analysts clearly less optimistic about Spirit Airlines' valuation following this update. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Spirit Airlines at US$48.00 per share, while the most bearish prices it at US$10.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Spirit Airlines' past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 16%, a significant reduction from annual growth of 14% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 2.4% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Spirit Airlines is expected to lag the wider industry.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for Spirit Airlines this year. They're also anticipating slower revenue growth than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Spirit Airlines.

Hungry for more information? At least one of Spirit Airlines' nine analysts has provided estimates out to 2022, which can be seen for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.