Spirit Airlines Shares Rebound After JetBlue Merger Block
Shares of Spirit Airlines Inc. are set to rebound on Monday, following a five-day losing streak caused by a federal judge’s decision to block a proposed $3.8 billion acquisition by JetBlue Airways Corp. The stock closed at a record low of $5.70 on Thursday but ended Friday’s session up 17.2%. In premarket trades on Monday, Spirit Airlines shares rose 2.5%.
The failed merger with JetBlue has raised concerns among investors about potential bankruptcy for Spirit Airlines. However, the discount carrier sought to reassure investors by giving an upbeat revenue forecast on Friday. The company expects revenue of $1.32 billion, which is at the high end of its prior guidance. Additionally, Spirit Airlines anticipates an adjusted operating margin of negative 12% to 13%, better than expected.
T.D. Cowen analyst Helane Becker acknowledged the volatility of Spirit Airlines shares due to the proposed merger with JetBlue Airways. She noted that the companies have filed an appeal to the judge’s decision banning the merger, as required under the merger agreement. Becker expects the shares to trade up at the beginning of the week following the announcement of the appeal.
In response to the appeal, Spirit Airlines and JetBlue have filed a notice of appeal to the U.S. Court of Appeals for the First Circuit. The companies are determined to fight for the merger and use their best efforts to close the deal.
Despite the positive revenue forecast and the appeal, T.D. Cowen maintained its market perform rating for Spirit Airlines and lowered its price target to $5 from $11. Of the 12 analysts surveyed by FactSet, seven have a hold rating, while five have an underweight or sell rating for Spirit Airlines.
While Spirit Airlines shares have fallen 66.5% in the last 52 weeks, JetBlue’s decline stands at 42.3%. In comparison, the S&P 500 index has gained 21.8%. The U.S. Global Jets ETF is down 10.5% over the same period.
The future of Spirit Airlines remains uncertain as it seeks ways to fix its finances. However, analysts express doubts about the airline’s ability to survive on its own. The outcome of the appeal and the ongoing legal battle with the Department of Justice will play a crucial role in determining the fate of the proposed merger and the future of Spirit Airlines.
As investors await further developments, the rebound in Spirit Airlines shares provides a glimmer of hope for the troubled airline. The appeal to the U.S. Court of Appeals for the First Circuit signals the determination of both Spirit Airlines and JetBlue to overcome the obstacles and proceed with the merger. Only time will tell whether their efforts will be successful or if Spirit Airlines will need to explore alternative options to secure its financial stability.
