NEW YORK (TheStreet) -- Shares of Spirit Airlines (SAVE) are down by 13.34% to $43.38 on heavy trading volume on Friday morning, following a rating downgrade to "equal weight" from "overweight" at Morgan Stanley.
The firm has cut its price target on the stock to $53 from $66.
The rating downgrade comes as Morgan Stanley sees limited visibility on improvement for Spirit Airlines.
Based in Miramar, FL, Spirit Airlines operates an all-Airbus fleet with over 300 daily flights to 56 destinations in the U.S., the Caribbean and Latin America.
"It is now more apparent that the SAVE model, while still attractive, may continue to struggle in an environment characterized by elevated capacity and subdued pricing, which is our forecast for the industry," Morgan Stanley said in an analyst note.
Separately, TheStreet Ratings team rates SPIRIT AIRLINES INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate SPIRIT AIRLINES INC (SAVE) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 6.7%. Since the same quarter one year prior, revenues rose by 10.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.42, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, SAVE has a quick ratio of 1.51, which demonstrates the ability of the company to cover short-term liquidity needs.
- SPIRIT AIRLINES INC has improved earnings per share by 19.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SPIRIT AIRLINES INC increased its bottom line by earning $3.06 versus $2.43 in the prior year. This year, the market expects an improvement in earnings ($4.16 versus $3.06).
- 35.84% is the gross profit margin for SPIRIT AIRLINES INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 13.85% is above that of the industry average.
- Net operating cash flow has significantly increased by 141.20% to $129.04 million when compared to the same quarter last year. In addition, SPIRIT AIRLINES INC has also vastly surpassed the industry average cash flow growth rate of 13.54%.
- You can view the full analysis from the report here: SAVE