In a report issued Monday, Avondale Partners analyst Bob McAdoo repeated a market outperform rating and raised his price target to $23 from the prior $18. At mid-morning Monday, shares were trading down 34 cents at $13.89.
McAdoo wrote that Spirit can deliver revenue and income growth above 20% for several years because it has sufficient funding to expand and so long as other carriers are not chasing its "price-sensitive, leisure customers
Under current conditions, Spirit's "business model may be insulated as the carrier continues to enter new markets," McAdoo wrote. "Although we've seen numerous airline failures over the years, early post-IPO share performance of Allegiant (ALGT - Get Report), JetBlue (JBLU), GOL (Brazil), Ryanair, and People Express rewarded early investors," McAdoo wrote. " We believe Spirit's share performance may be quite similar."Spirit's biggest advantages are strong performance -- since 2007 margins have exceeded industry average -- and low costs: Fourth-quarter 2010 cost per available seat mile, including fuel, was 9.35 cents, compared with 9.8 cents at Allegiant and legacy carrier costs ranging from 13.5 cents at Delta (DAL - Get Report), to 15.8 cents at US Airways (LCC). He said Spirit is "a plain vanilla growth story" with plenty of markets for expansion. Most other airlines probably won't target Spirit given its unique fee and fare structure and its lack of frequencies, a sure sign it is not chasing business fliers. "Traditional carriers may well view the Spirit customers as not worth pursuing," he wrote.