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Here's Why Investors Should Avoid Allegiant (ALGT) Stock Now
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Allegiant Travel Company (ALGT - Free Report) is currently mired in multiple headwinds, which, we believe, have made it an unimpressive investment option.
Let’s delve deeper.
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for the current quarter has been revised downward to a loss of 5 cents per share over the past 60 days. Earlier, the consensus estimate was pegged at earnings of $2.34.
For the current year, the consensus mark for earnings has moved 26% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Weak Zacks Rank and Style Score: Allegiant currently carries a Zacks Rank #5 (Strong Sell). Moreover, the company’s current Momentum Score of F shows its short-term unattractiveness.
Unimpressive Price Performance: ALGT has fallen 20.8% over the past year compared with its industry’s 11.1% decline.
Image Source: Zacks Investment Research
Other Headwinds: Escalating fuel costs pose a threat to Allegiant’s bottom line. The northward movement in crude oil price is primarily due to an extension of production cut by Saudi Arabia and Russia through the current-year end. In third-quarter 2023, average fuel price jumped 15% sequentially. For 2023, management expects fuel cost per gallon to be $3.12.
For 2023, under airline capex, aircraft, engines, induction costs and pre-delivery deposits are expected in the $430-440 million range, despite the economic uncertainty. Capitalized deferred heavy maintenance is suggested in the range of $60-$70 million. Other airline capital expenditures are envisioned to be between $150 million and $155 million. Such high capex may hurt the bottom line.
Bearish Industry Rank: The industry, to which ALGT belongs, currently has a Zacks Industry Rank of 198 (of 250 plus groups). Such an unfavorable rank places ALGT in the bottom 21% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Air Canada currently sports a Zacks Rank #1 (Strong Buy). An uptick in passenger traffic is aiding ACDVF. Recently, management announced plans to launch a new year-round route between Montreal and Madrid. You can see the complete list of today’s Zacks #1 Rank stocks here.
The service will commence in May of the following year as part of its expanded international summer 2024 flying schedule to cater to increased demand. The Zacks Consensus Estimate for current-year earnings has jumped 32.6% in the past 60 days.
SkyWest currently carries a Zacks Rank #2 (Buy). SKYW's fleet-modernization efforts are commendable. Initiatives to reward its shareholders also bode well. The Zacks Consensus Estimate for current-quarter earnings has surged 83.3% in the past 60 days.
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Here's Why Investors Should Avoid Allegiant (ALGT) Stock Now
Allegiant Travel Company (ALGT - Free Report) is currently mired in multiple headwinds, which, we believe, have made it an unimpressive investment option.
Let’s delve deeper.
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for the current quarter has been revised downward to a loss of 5 cents per share over the past 60 days. Earlier, the consensus estimate was pegged at earnings of $2.34.
For the current year, the consensus mark for earnings has moved 26% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Weak Zacks Rank and Style Score: Allegiant currently carries a Zacks Rank #5 (Strong Sell). Moreover, the company’s current Momentum Score of F shows its short-term unattractiveness.
Unimpressive Price Performance: ALGT has fallen 20.8% over the past year compared with its industry’s 11.1% decline.
Image Source: Zacks Investment Research
Other Headwinds: Escalating fuel costs pose a threat to Allegiant’s bottom line. The northward movement in crude oil price is primarily due to an extension of production cut by Saudi Arabia and Russia through the current-year end. In third-quarter 2023, average fuel price jumped 15% sequentially. For 2023, management expects fuel cost per gallon to be $3.12.
For 2023, under airline capex, aircraft, engines, induction costs and pre-delivery deposits are expected in the $430-440 million range, despite the economic uncertainty. Capitalized deferred heavy maintenance is suggested in the range of $60-$70 million. Other airline capital expenditures are envisioned to be between $150 million and $155 million. Such high capex may hurt the bottom line.
Bearish Industry Rank: The industry, to which ALGT belongs, currently has a Zacks Industry Rank of 198 (of 250 plus groups). Such an unfavorable rank places ALGT in the bottom 21% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Stocks to Consider
Investors interested in the broader Transportation sector may consider stocks like Air Canada (ACDVF - Free Report) and SkyWest (SKYW - Free Report) .
Air Canada currently sports a Zacks Rank #1 (Strong Buy). An uptick in passenger traffic is aiding ACDVF. Recently, management announced plans to launch a new year-round route between Montreal and Madrid. You can see the complete list of today’s Zacks #1 Rank stocks here.
The service will commence in May of the following year as part of its expanded international summer 2024 flying schedule to cater to increased demand. The Zacks Consensus Estimate for current-year earnings has jumped 32.6% in the past 60 days.
SkyWest currently carries a Zacks Rank #2 (Buy). SKYW's fleet-modernization efforts are commendable. Initiatives to reward its shareholders also bode well. The Zacks Consensus Estimate for current-quarter earnings has surged 83.3% in the past 60 days.