Turns out all Spirit Airlines (NYSE:SAVE) really needed to lift its share prices was to drop some airline fees. Though the move might cost it a few bucks up front, the returns could be impressive, and shareholders bought in, sending prices up fractionally in Monday afternoon’s trading.
Previously, Spirit Airlines was charging between $69 and $119 for changing tickets or canceling outright. But now, that fee has been reduced to absolutely nothing. Changing or canceling a ticket is now free at Spirit Airlines, a move that will likely endear it to the traveling public right as the height of summer travel season is about to kick off in earnest.
What’s more, that’s not the end of the changes at Spirit, but rather the beginning, as it has “many other enhancements in the works” and “…look(s) forward to sharing more soon.” Spirit took its cues here from Frontier Airlines (NASDAQ:ULCC), which also did away with cancellation and change fees.
A Mid-Air Game of Price Chicken
There is value in pursuing the low-cost consumer. After all, given the still-rampant inflation we’re all seeing at the gas pump, grocery store, and beyond, it’s little surprise that anyone taking a trip wants to do so for a deal. And in some cases, a deal—particularly at Spirit—can be found. But if too many deal-seekers take advantage, then there might be some financial issues. Offering a deal is one thing, but a deal still has to be profitable to come out ahead. Companies can only offer loss-leaders if they can make it up elsewhere, and Spirit is going to be hard-pressed to do that with its current setup.
Is Spirit Airlines a Buy or Sell?
Turning to Wall Street, analysts have a Moderate Sell consensus rating on SAVE stock based on four Holds and four Sells assigned in the past three months, as indicated by the graphic below. After a 73.01% loss in its share price over the past year, the average SAVE price target of $3.21 per share implies 15.64% downside risk.
Is It Wise to Allocate $1,000 Toward SAVE Stock Right Now?
Before you hurry to invest in SAVE, think about the following:
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