TD Cowen has maintained its hold rating on shares of Frontier Group Holdings Inc (NASDAQ: ULCC), with a steady price target of $4.00.
The firm anticipates that the airline will disclose its third-quarter earnings for 2024 in the last week of October. TD Cowen's projections align with the consensus for the third quarter, following an update of their estimates in September.
However, the firm's forecast for the pre-tax margin in the fourth quarter is slightly below consensus.
The analyst noted that while Frontier Group may benefit from reduced capacity by its competitors, they are looking for signs of sustainable revenue strategies and how the business will adapt to fewer sale-leaseback opportunities in 2025.
The airline industry has been closely monitored for its financial performance, especially in light of varying market conditions and operational challenges.
Frontier Group Holdings, like other airlines, has been navigating a complex landscape of fluctuating demand, changing fuel prices, and evolving consumer preferences.
The ability to execute revenue initiatives effectively is critical for airlines to maintain profitability and market share. Sale-leaseback transactions, which allow airlines to sell aircraft and lease them back, have been a common practice to manage capital and fleet costs.
In other recent news, Frontier Group Holdings, Inc. secured a $205 million revolving loan facility, with potential to increase to $500 million, and expanded its aircraft pre-delivery payment financing capacity to approximately $475 million.
These recent developments are aimed at improving the company's liquidity. In terms of analyst adjustments, Raymond James upgraded Frontier's stock from Underperform to Market Perform, while TD Cowen maintained a Hold rating but raised the stock target to $4.00.
Citi also raised Frontier's stock target to $4.70 but expressed concerns about the company's high financial leverage and cash burn rate. Susquehanna reduced its revenue estimate for the second half of 2024 by approximately 4% and the full-year 2025 revenue forecast by 6%. Frontier reported a 1% increase in total revenue to $973 million, indicating efforts towards operational efficiency and cost-cutting measures.
InvestingPro Insights
Recent InvestingPro data and tips offer additional context to Frontier Group Holdings' (ULCC) financial situation, aligning with TD Cowen's cautious stance. The company's market cap stands at $1.14 billion, with a concerning P/E ratio of -4.96 for the last twelve months as of Q2 2024. This negative P/E ratio reflects the company's current unprofitability, which is further emphasized by an InvestingPro Tip indicating that ULCC is not expected to be profitable this year.
The airline's financial challenges are evident in its operating metrics. With an operating income margin of -8.31% and an EBITDA of -$239 million for the last twelve months, Frontier is clearly struggling with profitability. This aligns with the InvestingPro Tip that the company is quickly burning through cash, which could be particularly problematic given another tip suggesting ULCC operates with a significant debt burden.
Despite these challenges, it's worth noting that ULCC has seen a strong return over the last month, with a 42.42% price total return. However, this should be viewed in the context of its volatile stock performance, as indicated by another InvestingPro Tip.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for ULCC, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.