Spirit: Breakout in Flight?

06/03/2014 7:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Airline stocks have done well in recent months and our latest featured breakout candidate is a leader in the group, suggests Leo Fasciocco, editor of Ticker Tape Digest.

Miramar, Florida-based Spirit Airlines (SAVE) was founded in 1964 as Clippert Trucking Company. It began air charter operations in 1990 and was renamed as Spirit Airlines, Inc. in 1992.

Its all-Airbus fleet currently operates some 250 daily flights to over 50 destinations in the United States, the Caribbean, and Latin America.

Wiith solid earnings growth expected this year and next, we see this stock in a good spot to be accumulated in anticipation of a technical breakout.

Net for the upcoming second quarter should rise 20% to 76 cents a share from 63 cents a year ago. The highest estimate on the Street is at 78 cents a share.

We see good chances for an upside earnings surprise. SAVE topped the consensus estimate the past four out of five quarters.

This year, analysts are forecasting a 20% increase in SAVE's earnings to $2.92 a share from $2.43 a year ago. The stock sells with a price-earnings ratio of 20. We see that as reasonable.

Going out to 2015, the Street projects a 26% gain in profits to $3.69 a share—from the anticipated $2.92 this year.

The stock came public in June of 2011 and trading at $11. The stock rose to a peak of $24 in 2012 and then pulled back. SAVE made an all-time high earlier this year at $63.89. It is now in position to challenge that peak. If it can top that, it could draw in more buying.

The stock has advanced from $40 back in November to a peak near $63 by March. It then trended mostly sideways in a trading range with a low near $54. The stock is now moving higher and poised to attack its breakpoint at $64.

We suggest accumulation of a partial stake in SAVE with further buying to be done on a breakout over $64. We are targeting SAVE for a move to $78 after a breakout. A protective stop can be placed near $56.

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