Spirit Airlines’ Stock Is Flying High in 2016: Can It Continue?



Stock movement

In 2015, Spirit Airlines (SAVE) was the worst-performing airline stock, losing almost 47%. Although SAVE managed to clock higher revenue growth rates than all its peers except Allegiant Travel (ALGT), its heavily declining yields and utilization caused the havoc.

This trend changed in 2016, with Spirit Airlines’ stock being the best-performing airline stock. SAVE’s stock has gained almost 29% year-to-date (or YTD) as of April 19, 2016. No other airline even came close.

Southwest Airlines (LUV), which gained ~8.6%, was next in line. Southwest was followed by Allegiant, which gained 3.4% YTD. Year-to-date, Alaska Air Group (ALK) and United Airlines (UAL) each gained 1%.

Delta Air Lines (DAL) was the biggest loser, falling by almost 8.4%, followed closely by JetBlue Airways (JBLU), which lost 7.5% YTD. American Airlines (AAL) also lost 3.4% YTD.

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The broader market, tracked by the S&P 500 Index (SPY), has also gained 1.9% YTD. As consumers typically use their discretionary funds when purchasing airline tickets, it makes sense to compare the airlines’ performance with the consumer discretionary sector. The Consumer Discretionary SPDR ETF (XLY) rose by 1% YTD.

Series overview

Spirit Airlines (SAVE) is expected to announce its 1Q16 financial results on April 26, 2016. Spirit Airlines experienced a mixed year in 2015. It witnessed industry-leading growth in terms of sales, traffic, and capacity. All of this growth came at a cost, though, with SAVE’s capacity utilization and yields declining heavily.

In this series, we’ll look at what investors can expect for 1Q16 and more importantly, for fiscal 2016. We will also discuss key indicators that investors should watch for.


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