NEW YORK (TheStreet) - Virgin America (VA) has gained nearly 70% from its Nov. 13 offering price of $23. The stock was trading 8.6% higher to $38.91 on Wednesday following bullish comments by Wall Street analyst after initiating coverage on the airline best known for low fares and hip amenities.
San Francisco-based Virgin America, famous for its sleek, high-tech cabins catering to the business class, flies to roughly 20 airports in the U.S. and Mexico.
Here's what analysts are saying:
Michael Lindenberg, Deutsche Bank (Buy; $44 PT)
We are initiating coverage of VA shares with a Buy rating as we think they represent an attractive means to invest in a low cost carrier that is pursuing a unique strategy: targeting price-sensitive business travelers and high-end leisure customers who ascribe value to a hip, high-tech, high-touch travel experience.
Focused on maintaining low cost advantage Virgin America is able to offer a lower price for its three-class product than its primary competitors (namely the traditional network carriers) due to its lower cost structure. This is largely accomplished by flying a single aircraft type (Airbus A320 family), high asset utilization, and outsourcing all functions that are non-passenger facing (e.g. baggage delivery, heavy maintenance, reservations, etc.). Ample opportunities for growth supported by 2015 - 2016 fleet expansion Given Virgin's size, it does not take much to "move the needle" with respect to growth.
The IPO plus a concurrent restructuring of its debt had the effect of materially deleveraging the company's balance sheet resulting in a net cash position: on-balance sheet debt of $118 mm and cash and marketable securities of $399 mm. We believe that the improved credit profile of the company should result in lower aircraft ownership costs going forward. Despite recent surge, stock a Buy on lower fuel and introduction of 2016 EPS.