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On Tuesday, UBS began reporting the next day. Allegiant Travel The Company (NASDAQ:) has a Sell rating and a $58.00 price target. The company expressed a positive outlook for the airline industry as a whole, saying it expects a multi-quarter profit recovery in the second half of this year despite the current uncertainties.
The analyst cited a slow recovery in revenue per available seat mile (RASM) as a near-term concern, but noted that risks have been mitigated after Allegiant's stock price fell 17% last week. RASM will gradually improve, with a low-single-digit percentage in the second quarter, and he is expected to approach a mid-single-digit percentage in the fourth quarter.
This projected improvement is due to Allegiant's network optimization strategy, which is expected to improve load factors and result in better-than-expected margins in late 2024 and into 2025.
This analysis suggests that the current share price does not fully reflect earnings potential, with the market pricing in 2025 EBITDAR of $2.76 billion, compared to UBS's forecast of $3.6 billion. It's less than $40 million.
The company's stance indicates that short-term risks are now largely taken into account and that there is a favorable risk-reward scenario for the airline industry, with the potential for profit growth in the second half of the year. UBS' coverage of Allegiant Travel Company reflects a cautious approach amid expectations for a sector-wide recovery.
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