Spirit Airlines (SAVE) stock is one of the worst stocks on Friday, down 26% at last check, on a report that the embattled airline company could file for bankruptcy in the near future.
Spirit has been exploring ways to restructure its balance sheet since August but has recently been focused on reaching a deal with its bondholders and creditors to support a Chapter 11 bankruptcy filing, according to The Wall Street Journal, citing people familiar with the matter.
Spirit currently holds $3.3 billion in debt and has not turned a profit since before the COVID-19 pandemic.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The news of a potential bankruptcy filing for Spirit Airlines comes just 10 months after its failed merger attempt with JetBlue Airways (JBLU). The two airlines tried to combine to create a "national low-fare, high-value competitor to the Big Four airlines," but the U.S. Department of Justice sued to block the deal on grounds that it would reduce competition and increase prices on domestic travelers. The airlines subsequently terminated their agreement.
"After discussing our options with our advisors and JetBlue, we concluded that current regulatory obstacles will not permit us to close this transaction in a timely fashion under the merger agreement," said Spirit Airlines CEO Ted Christie in a March 4 statement. "We are disappointed we cannot move forward with a deal that would save hundreds of millions for consumers and create a real challenger to the dominant 'Big 4' U.S. airlines."
What does Wall Street think about Spirit Airlines stock?
With today's decline, Spirit Airlines shares are now down 90% for the year to date. And given SAVE's issues on and off the price charts, it's unsurprising to see that Wall Street is overwhelmingly bearish on the industrial stock.
According to S&P Global Market Intelligence, the consensus analyst target price for SAVE stock is $2.43, representing implied upside of 8% to the stock's October 3 close. Meanwhile, the consensus recommendation is Sell. However, price targets may very well be adjusted lower following the news of the potential bankruptcy.
Financial services firm Susquehanna Financial Group is one of those with a Negative rating (equivalent to a Sell) on the penny stock and a $2.50 price target.
"We continue to see a challenging operating backdrop for U.S. carriers into 3Q, with low-cost carrier Alaska Airlines' 'book now, pay later' sales promo reinforcing our view that there are still too many U.S. domestic seats chasing the same (leisure) traveler," said Susquehanna analyst Christopher Stathoulopoulos in a July 16 note.
Related Content
-
Stock Market Today: Stocks Rally Despite Rising Geopolitical TensionThe main indexes were mixed on Tuesday but closed well off their lows after an early flight to safety.
-
What's at Stake for Alphabet as DOJ Eyes Google's ChromeAlphabet is higher Tuesday even as antitrust officials at the DOJ support forcing Google to sell its popular web browser. Here's what you need to know.
-
Stock Market Today: Stocks Rally Despite Rising Geopolitical Tension
The main indexes were mixed on Tuesday but closed well off their lows after an early flight to safety.
-
What's at Stake for Alphabet as DOJ Eyes Google's Chrome
Alphabet is higher Tuesday even as antitrust officials at the DOJ support forcing Google to sell its popular web browser. Here's what you need to know.
-
Lowe's Stock Is Falling After Earnings. Here's WhyLowe's stock is lower Tuesday as Wall Street weighs a beat-and-raise quarter against declining revenue. This is what you need to know.
-
Why Walmart Stock's a Buy After Its Beat-And-Raise QuarterWalmart is the best Dow Jones stock Tuesday after the retail giant's solid earnings report and outlook and Wall Street thinks it's just getting started. Here's what they're saying.
-
Winners and Losers of Fed Rate CutsNavigating interest-rate changes can seem daunting, but these areas of the fixed-income market could perform better (or worse) than others.
-
Six Ways to Optimize Your Charitable Giving Before Year-EndAs 2024 winds down, right now is the time to look at how you plan to handle your charitable giving. The sooner you start, the more tax-efficient you can be.
-
How Preferred Stocks Can Boost Your Retirement PortfolioHigher yields, priority on dividend payments and the potential for capital appreciation are just three reasons to consider investing in preferred stocks.
-
Structured Settlement Annuity vs Lump-Sum Payout: Which Is Better?As the use of structured settlement annuities grows, it can be tough to decide whether to take the lump sum to invest or opt instead for guaranteed payments.
