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Message
My case for Spirit Airlines
Posted on 3/18/20 at 9:09 pm
Posted on 3/18/20 at 9:09 pm
Alot of people are talking about what airlines stocks to buy. I see many saying Delta and Southwest, which I don't think are bad buys, but I'm gonna make a case for Spirit Airlines.
They are currently the only big airline I can find that has a Quick Ratio over 1. Which means they are the only airline that can actually pay their current liabilities with their own money today (short term) if need be. They are not over-leveraged like many of the other carriers (American Airlines especially, holy shite)
As a matter of fact, they almost have enough straight cash to pay off their current liabilities (about 90% of it). No other airline has even 30% except JetBlue.
They've been beaten down like all other airlines, but are currently trading at a 4.6 P/E and 1.22 Price to Book, which are among the lowest of any of the airlines.
Add on the fact that they are a budget carrier and primarily domestic, and it's easy to see them rebound quickly as domestic travel won't be as affected by this as international travel, and people will be looking for savings with the looming mini-recession that is sure to come with these economic consequences. They have strong margins for the industry also.
They are currently trading at their lowest price in their relatively short public history. I know they aren't popular, but in my opinion it's hard to ignore these numbers.
ETA: my numbers were off. They're currently trading at a P/E below 2, and a Price to Book at about .27. Meaning they're trading at less than a third of their Book Value.
They are currently the only big airline I can find that has a Quick Ratio over 1. Which means they are the only airline that can actually pay their current liabilities with their own money today (short term) if need be. They are not over-leveraged like many of the other carriers (American Airlines especially, holy shite)
As a matter of fact, they almost have enough straight cash to pay off their current liabilities (about 90% of it). No other airline has even 30% except JetBlue.
They've been beaten down like all other airlines, but are currently trading at a 4.6 P/E and 1.22 Price to Book, which are among the lowest of any of the airlines.
Add on the fact that they are a budget carrier and primarily domestic, and it's easy to see them rebound quickly as domestic travel won't be as affected by this as international travel, and people will be looking for savings with the looming mini-recession that is sure to come with these economic consequences. They have strong margins for the industry also.
They are currently trading at their lowest price in their relatively short public history. I know they aren't popular, but in my opinion it's hard to ignore these numbers.
ETA: my numbers were off. They're currently trading at a P/E below 2, and a Price to Book at about .27. Meaning they're trading at less than a third of their Book Value.
This post was edited on 3/19/20 at 8:16 am
16
Posted on 3/18/20 at 9:18 pm to rintintin
Impressive research... no shite. I will review in more depth
Posted on 3/18/20 at 9:32 pm to rintintin
These are the type of posts I have been looking for.
Posted on 3/18/20 at 9:46 pm to rintintin
I bought Spirit last week and it has since gone down another $8 per share. Want to pick up more, but now hesitant to pull the trigger because there’s no telling how much lower it’s gonna go at this point.
Posted on 3/18/20 at 9:53 pm to rintintin
Solid take
Posted on 3/18/20 at 9:54 pm to rintintin
It's a great buy
Posted on 3/18/20 at 10:28 pm to rintintin
There is a lot to like but also concern over how much routes they will be able to get when all of the dust settles. You have some really big carriers that are going to be fighting over every scrap coming out of this.
Posted on 3/18/20 at 10:43 pm to hiltacular
quote:
You have some really big carriers that are going to be fighting over every scrap coming out of this.
bingo
Everone of them will be discounting seats which realy hurts the budget airlines, and no one will ever choose spirit, frontier etc over a major if pricing is comparable.
Posted on 3/18/20 at 10:51 pm to cave canem
quote:
Everone of them will be discounting seats which realy hurts the budget airlines, and no one will ever choose spirit, frontier etc over a major if pricing is comparable.
That's a fair take, although other airlines won't be as profitable as Spirit with those prices. Spirit has similar or better margins than most other airlines, which means they can reduce prices even more and still be profitable.
Airlines like American who are leveraged to the gills and have basically no cash comparative to their debt wont be able to be a budget airline for long.
Also, Spirit doesn't hedge oil prices like some other airlines, therefore they're gonna get a huge break with oil prices right now.
This post was edited on 3/18/20 at 10:53 pm
Posted on 3/18/20 at 10:58 pm to Jjdoc
quote:
It's a great buy
Every single airline in the USA is about to go into bankruptcy protection. ALL OF THEM. I wouldn’t touch any of them right now. I have been killing it on OTM puts on airline stocks. I wouldn’t buy any of them, and wouldn’t be surprised if the only survivors are legacy carriers and LUV. And that’s only because the government won’t let them fail completely.
Posted on 3/19/20 at 2:24 pm to rintintin
Agree 100% on Spirit. Not a matter of IF I’m going in, but a matter of when. Quick ratio looks good, and love the ratio of CA that is make up by cash and equivalents.
How do you feel about the long term debt, however?
I haven’t reviewed 10k in super detail, but if the before mentioned lack of hedges on oil is true, that is huge. Almost 30% of their operating expenses is fuel.
How do you feel about the long term debt, however?
I haven’t reviewed 10k in super detail, but if the before mentioned lack of hedges on oil is true, that is huge. Almost 30% of their operating expenses is fuel.
Posted on 3/19/20 at 2:55 pm to rintintin
Spirit operates with very little overhead and staff relative to other airlines
Posted on 3/19/20 at 3:22 pm to JetFuelTyga
This is straight from their 10-K.
As far as their long term debt, it's the only thing that really concerns me. They have some contractual agreements to purchase airplanes and other equipment over the next 5+ years that run in the billions. They won't have the cash to do that unless they get back to operating fully again, but I'm sure they have lines of credit, plus a piece of the $50 bil gov't fund to help them out.
I imagine many airlines are gonna run into debt problems though, because almost all of them are leveraged considerably. Spirit at least doesn't have a large amount of short term debt.
quote:
Our results of operations can vary materially due to changes in the price and availability of aircraft fuel.
Gulf Coast Jet indexed fuel is the basis for a substantial majority of our fuel consumption. Based on our annual fuel consumption, a hypothetical 10% increase in the average price per gallon of aircraft fuel would have increased into-plane aircraft fuel cost for 2019 by $99.3 million.
As far as their long term debt, it's the only thing that really concerns me. They have some contractual agreements to purchase airplanes and other equipment over the next 5+ years that run in the billions. They won't have the cash to do that unless they get back to operating fully again, but I'm sure they have lines of credit, plus a piece of the $50 bil gov't fund to help them out.
I imagine many airlines are gonna run into debt problems though, because almost all of them are leveraged considerably. Spirit at least doesn't have a large amount of short term debt.
This post was edited on 3/19/20 at 3:25 pm
Posted on 3/19/20 at 3:39 pm to rintintin
Damn from $45 to $8. That’s a hell of a drop
Posted on 3/19/20 at 3:51 pm to rintintin
frick Spirit Airlines. I bought Delta and Southwest this morning and would rather see them go bankrupt than see Sprit survive.
Posted on 3/19/20 at 3:56 pm to LSURN98
quote:
. I have been killing it on OTM puts on airline stocks
Can you explain this some more to me please?
Posted on 3/19/20 at 4:07 pm to rintintin
What do you think is the better strategy? Just buy Spirit stock or buy OTM calls that expire in the second half of 2020? Seems like a recovery to $20-$30/share would be fairly achievable.
Posted on 3/19/20 at 4:54 pm to LSU82BILL
quote:
frick Spirit Airlines. I bought Delta and Southwest this morning and would rather see them go bankrupt than see Sprit survive.
Never take investing personally. At least that is what I have been told.
Posted on 3/19/20 at 6:12 pm to GeneralLee
quote:
What do you think is the better strategy? Just buy Spirit stock or buy OTM calls that expire in the second half of 2020? Seems like a recovery to $20-$30/share would be fairly achievable.
I'm not incredibly knowledgeable on options so take my input with a grain of salt.
I think it just depends on how much money you are willing to invest and if you actually want to own the stock. I'm a little more conservative and looking at it from a longer term perspective, so what shy's me away from call options is the time factor. Not only the decay, but hoping it rebounds by late 2020.
I think it's just too hard to predict how long it will take airlines to come back. Their earnings are gonna be putrid for at least 2 quarters, and who knows when people are going to start travelling like normal again.
Personally I'd rather throw some money into them long term and hope they're running back to normal in a couple of years. If they even get back to their previous 5-year low (which is basically their book value) you're looking at quadrupling your money.
This post was edited on 3/19/20 at 6:22 pm
Posted on 3/20/20 at 7:38 am to go ta hell ole miss
quote:
Never take investing personally. At least that is what I have been told.
What I am taking personally is the way Spirit Airlines treated me as a customer and their sleazy business ethics.
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