SAVE Stock Takes Off After Guidance Update

Spirit Airlines has defied broad-market headwinds in the fourth quarter

Deputy Editor
Nov 27, 2018 at 10:45 AM
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Spirit Airlines Incorporated (NYSE: SAVE) stock is up in almost 21% to trade at $61.58 this morning -- and earlier notched a new three-year high of $62.01 -- after the company upped its fourth-quarter unit revenue guidance, based on an increase in non-ticket revenue such as luggage and seating, as well as a higher load factor. As such, a pair of analysts upped their price targets on SAVE stock.

While most of the stock market has struggled in recent months, Spirit Airlines shares have soared, already up nearly 29% in the fourth quarter. SAVE last month jumped after its earnings report exceeded analysts' expectations, and the stock has skyrocketed roughly 79% since touching an annual low of $34.36 in late June. 

As alluded to earlier, analysts are showing love for SAVE, too, with Cowen raising its price target to $60 from $55. Evercore ISI lifted its target to $68 from $58. The majority of analysts are already bullish on the stock, with eight issuing a "strong buy" rating, compared to five "holds" and no "sell" ratings. On the other hand, additional price-target hikes could be coming down the pike, as the stock's average 12-month price target sits at just $64.12. 

Sentiment has taken a surprisingly bearish shift in the options pits, though, with SAVE sporting a 10-day put/call volume ratio of 1.92 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the lofty 94th percentile of its annual range, indicating the appetite for long puts over calls has been much higher than usual as of late. However, considering SAVE's rally, it's possible some of this put buying is attributable to shareholders seeking options insurance.

Short interest fell 21.3% in the most recent reporting period, indicating that bears are starting to hit the exits as SAVE flies higher. These bearish bets still account for 5.71 million shares, or about 8.4% of the stock's available float, though. It would take about a week for short traders to cover their pessimistic positions, at SAVE's average pace of trading -- potential fuel for a short squeeze. 

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