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Allegiant Gains 25.7% in a Month: What Should Investors Do Now?
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Shares of Allegiant Travel Company (ALGT - Free Report) have had a good time on the bourses of late, improving in double-digits over the past 30 days. The encouraging price performance resulted in ALGT outperforming its industry in the said time frame. Moreover, ALGT’s price performance compares favorably with that of fellow U.S. airline operators Southwest Airlines Co. (LUV - Free Report) and Delta Air Lines (DAL - Free Report) in the same time frame.
One-Month Price Comparison
Image Source: Zacks Investment Research
Currently trading at $52.94, the stock rebounded 46.68% from its 52-week low of $36.09 on Aug. 12, 2024. However, it still reflects a significant 38.37% discount from its 52-week high of $85.91 reached on Dec. 22, 2023.
Given the recent rally, the question that naturally arises is whether ALGT stock can sustain its bullish price performance or should investors book profits now. Before that, let's delve deep to unearth the reasons behind this northward price movement.
ALGT Issues Bullish Q3 View on Upbeat Summer Travel
Allegiantnow anticipates its third-quarter capacity for scheduled service to increase 1.6% on a year-over-year basis, an improvement from the prior expectation of an increase of 1.3%. Operating margin is now expected to decline in the 0.5-1.5% range, which marks an improvement over the prior forecast to decline in the 4.5-6.5% band.
Loss per share is now anticipated to be in the range of $1.75–$2.25, which marks an improvement from the prior expectation of loss per share of $2.50–$3.50. The Zacks Consensus Estimate is pegged at a loss of $2.38 per share.
Declining fuel expenses mark another major positive. Allegiant now anticipates third-quarter 2024 fuel cost per gallon to be $2.70, down from the prior view of $2.80. Lower fuel costs should boost the company’s bottom line, as fuel expenses represent a key input cost for any transportation player.
Non-fuel unit costs are expected to be up almost 4.5% on a year-over-year basis. This marks an improvement of 2.5 points from the prior view of increasing 7%. The uptick was owing to the CrowdStrike (CRWD - Free Report) -induced disruptions across the industry and a better-than-expected completion factor during the quarter.
The global technology outage on July 19, caused by security software provider CrowdStrike’s software update, has hit some of the major U.S. airlines, leading to multiple flight cancelations. ALGT reaped the benefits from the troubles of its competitors’ flight cancelations.
Impressive Valuation Picture for ALGT Stock
From a valuation perspective, ALGT is trading at a discount compared to the industry, going by its forward 12-month price-to-sales ratio. The reading is also below its median over the last five years. The company has a Value Score of A.
Image Source: Zacks Investment Research
Rising Expenses Weigh on Allegiant Stock
The northward movement in expenses on labor is hurting ALGT’s bottom line by pushing up operating costs. During the first half of 2024, total operating expenses rose 15.1% year over year. This was preceded by a 3.6% increase in 2023.
Given this headwind surrounding the stock, earnings estimates have been southbound, as shown below.
Image Source: Zacks Investment Research
To Conclude
It is understood that ALGT stock is attractively valued, and upbeat air travel demand is contributing to ALGT’s top line. However, investors should refrain from rushing to buy ALGT now due to the headwinds that it faces.
Instead, they should monitor the company’s developments closely for a more appropriate entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank #3 (Hold) supports our thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Allegiant Gains 25.7% in a Month: What Should Investors Do Now?
Shares of Allegiant Travel Company (ALGT - Free Report) have had a good time on the bourses of late, improving in double-digits over the past 30 days. The encouraging price performance resulted in ALGT outperforming its industry in the said time frame. Moreover, ALGT’s price performance compares favorably with that of fellow U.S. airline operators Southwest Airlines Co. (LUV - Free Report) and Delta Air Lines (DAL - Free Report) in the same time frame.
One-Month Price Comparison
Currently trading at $52.94, the stock rebounded 46.68% from its 52-week low of $36.09 on Aug. 12, 2024. However, it still reflects a significant 38.37% discount from its 52-week high of $85.91 reached on Dec. 22, 2023.
Given the recent rally, the question that naturally arises is whether ALGT stock can sustain its bullish price performance or should investors book profits now. Before that, let's delve deep to unearth the reasons behind this northward price movement.
ALGT Issues Bullish Q3 View on Upbeat Summer Travel
Allegiantnow anticipates its third-quarter capacity for scheduled service to increase 1.6% on a year-over-year basis, an improvement from the prior expectation of an increase of 1.3%. Operating margin is now expected to decline in the 0.5-1.5% range, which marks an improvement over the prior forecast to decline in the 4.5-6.5% band.
Loss per share is now anticipated to be in the range of $1.75–$2.25, which marks an improvement from the prior expectation of loss per share of $2.50–$3.50. The Zacks Consensus Estimate is pegged at a loss of $2.38 per share.
Declining fuel expenses mark another major positive. Allegiant now anticipates third-quarter 2024 fuel cost per gallon to be $2.70, down from the prior view of $2.80. Lower fuel costs should boost the company’s bottom line, as fuel expenses represent a key input cost for any transportation player.
Non-fuel unit costs are expected to be up almost 4.5% on a year-over-year basis. This marks an improvement of 2.5 points from the prior view of increasing 7%. The uptick was owing to the CrowdStrike (CRWD - Free Report) -induced disruptions across the industry and a better-than-expected completion factor during the quarter.
The global technology outage on July 19, caused by security software provider CrowdStrike’s software update, has hit some of the major U.S. airlines, leading to multiple flight cancelations. ALGT reaped the benefits from the troubles of its competitors’ flight cancelations.
Impressive Valuation Picture for ALGT Stock
From a valuation perspective, ALGT is trading at a discount compared to the industry, going by its forward 12-month price-to-sales ratio. The reading is also below its median over the last five years. The company has a Value Score of A.
Rising Expenses Weigh on Allegiant Stock
The northward movement in expenses on labor is hurting ALGT’s bottom line by pushing up operating costs. During the first half of 2024, total operating expenses rose 15.1% year over year. This was preceded by a 3.6% increase in 2023.
Given this headwind surrounding the stock, earnings estimates have been southbound, as shown below.
To Conclude
It is understood that ALGT stock is attractively valued, and upbeat air travel demand is contributing to ALGT’s top line. However, investors should refrain from rushing to buy ALGT now due to the headwinds that it faces.
Instead, they should monitor the company’s developments closely for a more appropriate entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank #3 (Hold) supports our thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.