In a report released today, Ravi Shanker from Morgan Stanley maintained a Hold rating on Allegiant Travel Company (ALGT – Research Report), with a price target of $85.00.
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Ravi Shanker has given his Hold rating due to a combination of factors influencing Allegiant Travel Company. The company’s decision to significantly increase capacity by the end of the year, despite industry trends favoring revenue per available seat mile (RASM) over growth, has raised concerns. This strategy comes after a period of decreased demand, prompting Allegiant to adjust its growth targets to 13%, which remains high compared to peers. Management’s guidance on second-quarter RASM is also challenging, as it is expected to perform worse than the first quarter.
Despite these challenges, management is confident that their approach will optimize margins, although they plan to reassess their capacity strategy later in the second quarter. Additionally, while Sunseeker’s results improved during its peak season, there is uncertainty about its future as the company reviews strategic options. Overall, Allegiant’s situation is seen as a “show me” story, with the market awaiting clarity on the implications of the company’s capacity growth plan and its impact on RASM and cost per available seat mile (CASMx).
In another report released on May 13, UBS also maintained a Hold rating on the stock with a $60.00 price target.