Frontier Group Holdings, the parent company of Frontier Airlines, has seen a significant decline in its stock price, with a 38% drop in recent months and over 60% decrease in the past year. This decline has prompted a reassessment of the stock rating.
Frontier Airlines is expecting a capacity expansion of 12 to 14 percent in the second quarter of 2024, with pre-tax margins projected to be between 3 to 6 percent. This is in contrast to Spirit Airlines, which is facing challenges with a quarter of its fleet grounded. Frontier Airlines, on the other hand, has less than 2% of its fleet grounded, giving it an advantage in the current market.
Analysts predict a 6.6% growth in revenues to $1.03 billion for Frontier Airlines in the second quarter, with earnings per share expected to be $0.14, indicating a 55% growth. While there have been some downward revisions in revenue estimates, the overall outlook remains positive.
Despite some concerns about softening demand and overcapacity in the market, Frontier Airlines seems to have better cost control compared to other low-cost carriers. The company has managed to keep costs in check and avoid significant fleet grounding, positioning it well for the future.
Overall, Frontier Airlines is considered a speculative buy at this time, with potential for improvement in its operating and free cash flow trajectory. The stock is likely to remain volatile in the near term, but there is potential for significant upside in the long run. Investors should closely monitor the company’s performance in the coming quarters to assess its true value.