Yesterday, shares of Spirit Airlines (SAVE:NYE) saw a significant 5.8% drop in its stock value. This decline came in response to a recent report from Dealreporter, which shed light on the Department of Justice’s (DOJ) commitment to blocking the proposed acquisition of Spirit Airlines by JetBlue Airways (JBLU:NSD). Investors are certainly feeling the pressure as this legal showdown continues, sending shockwaves through the entire airline sector. In fact, JetBlue Airways’ stock plummeted to a 52-week low of $4.57 in response to this latest development.
The Monopolistic Merger in Question:
JetBlue’s $3.8 billion acquisition of Spirit Airlines is closely examined by regulators for possible monopolistic effects. The DOJ argues it could harm competition and consumer choices, raising concerns about the industry’s competitiveness. The trial between the DOJ and JetBlue is set to commence on October 16, further magnifying uncertainties surrounding this deal.
JetBlue’s Strategic Moves:
In an attempt to garner regulatory approval, JetBlue recently announced plans to divest all of Spirit Airlines’ holdings at Boston and Newark airports, transferring them to Allegiant Travel (ALGT:NSD).
JetBlue’s Divestiture Efforts:
Furthermore, JetBlue plans to hand over five gates and ground facilities at Fort Lauderdale’s airport, aiming to foster the growth of ultra-low-cost carriers. Earlier in June, JetBlue had also committed to divesting all of SAVE’s holdings at New York’s LaGuardia Airport to Frontier Group (ULCC:NSD), another key player in the U.S. low-cost carrier segment. These divestiture measures have not alleviated the DOJ’s antitrust concerns, as they seem insufficient to address the merger’s anti-competitive issues.
Spirit Airlines Stock Financial Struggles
Spirit Airlines has recently faced its own set of challenges, including a downward revision of its Q3 2023 revenue forecast, citing escalating fuel prices and intensified promotional activity.
Broader Market Sentiment:
Analysts at Evercore ISI maintain an “In-Line” rating while reducing the price target from USD 25 to USD 20 though he maintains a Hold rating. This adjusted rating reflects expectations of higher fuel costs in Q3. These increased costs will impact not only Spirit Airlines but also Frontier Airlines.
Future Prospects of Spirit Airlines Stock:
According to the consensus of four analysts, the average 12-month target price for Spirit Airlines stock stands at USD 18.58. Additionally. The average analyst rating is Hold. Stock Target Advisor’s analysts are Very Bearish on this stock, driven by 11 negative signals against just one positive signal.
Recent Performance:
As of the last closing, S stock traded at USD 15.06, marking a 12.85% decline over the past week, a 9.66% dip over the past month, and a substantial 33.86% decrease over the last year.
Conclusion:
Spirit Airlines’ stock value remains under pressure due to the ongoing legal battle surrounding its acquisition by JetBlue. The regulatory challenges, coupled with the airline’s own financial headwinds, have cast shadows over its short-term prospects. Investors are urged to exercise caution and closely monitor the evolving situation before making any investment decisions related to Spirit Airlines stock.
