Miserable news this week for investors in Spirit Airlines (SAVE -1.30%) stock: On Monday, Spirit reported losing $1.46 per share in Q1, adjusted for one-time items -- only a penny worse than Wall Street analysts had predicted it would lose, but still a big loss. No sooner had this news been revealed than TD Cowen analyst Helane Becker cut her price target on Spirit stock from $4 a share to just $3.
Becker maintained a "hold" rating on the stock, but seeing as her price target implies Spirit stock will lose another 10% over the next 12 months, perhaps investors would be better off just selling the stock?
Is Spirit Airlines stock a sell?
Describing the price target cut, Becker explained that Spirit's Q1 loss was already expected. What was not expected was that management would forecast weak revenue of only about $1.3 billion in Q2 as well -- almost as bad as Q1.
If this is the way things play out, it will mark Spirit's fourth straight quarter of declining revenues, and probably its 11th straight quarter of losing money as well. That's not a good look for the stock, especially when compared to the powerful profits that rivals such as Delta and United Airlines are raking in. While Spirit blamed "adverse weather and air traffic control related delays," as well as continued plane groundings arising from RTX Corporation's engine manufacturing defect fiasco last year for poor results in Q1 continuing into Q2... it's harder to explain away 11 straight quarters of losing money.
That seems more of a structural problem to me.
And not just to me. According to forecasts collected by S&P Global Market Intelligence, most analysts are forecasting Spirit will continue losing money through this year, next year, and well into 2026 as well. With Spirit Airlines stock currently valued below $400 million and struggling under a $6.3 billion net debt load, it's hard to be optimistic about Spirit.
Even a $3 price target may be too generous for this airline.
