Shares of Spirit Airlines Inc. are set to continue their rebound on Monday, according to T.D. Cowen, as they rally back from a five-day losing streak. The decline followed a federal judge's decision to block JetBlue Airways Corp.'s proposed $3.8 billion acquisition of the airline.
After reaching a record low of $5.70 on Thursday, Spirit Airlines shares ended Friday's session up 17.2%. They gained further momentum as the discount carrier provided an optimistic revenue forecast, aiming to reassure worried investors about the potential bankruptcy risks associated with the failed merger with JetBlue.
In premarket trades on Monday, Spirit Airlines saw a modest 2.5% increase in its share price. Analyst Helane Becker from T.D. Cowen acknowledged the volatility of these shares due to the proposed merger with JetBlue Airways.
While the companies filed an appeal against the judge's decision to ban the merger, Becker noted that the shares initially dropped when the judge ruled in favor of the Department of Justice (DOJ) in the DOJ vs. Spirit and JetBlue case. However, with news of the upcoming appeal, Becker anticipates a positive market reaction at the beginning of the week.
Related: Spirit Airlines Faces Financial Challenges
Despite Spirit Airlines' efforts to address its financial situation, analysts express concerns about its prospects without the JetBlue merger.
Spirit Airlines and JetBlue File Notice of Appeal
Both Spirit Airlines and JetBlue have filed a notice of appeal to the U.S. Court of Appeals for the First Circuit, in accordance with the merger agreement requirements^1^. This move comes as Spirit Airlines updates its guidance, with the airline expecting revenue of $1.32 billion (the high end of prior guidance) and an adjusted operating margin of negative 12% to 13%, which is better than expected^1^. Bookings for peak holiday travel have been strong, according to management. Additionally, operating expenses are forecasted to be better than expected^1^.
T.D. Cowen has maintained its market perform rating for Spirit Airlines but lowered its price target from $11 to $5. Among the 12 analysts surveyed by FactSet, seven have a hold rating, while five have an underweight or sell rating for Spirit Airlines^1^.
In premarket trades on Monday, JetBlue shares were down 0.8% after ending Friday's session down 1.2%^1^. Over the last 52 weeks, Spirit Airlines shares have fallen 66.5%, compared to JetBlue's decline of 42.3% and the S&P 500 index's gain of 21.8%^1^. The U.S. Global Jets ETF JETS has also seen a decrease of 10.5% during the same period^1^.