ALGT - Allegiant SkyWest upgraded at Deutsche Bank on ROIC improvement

2023-06-15 08:39:11 ET

Allegiant Travel Company ( NASDAQ: ALGT ) and SkyWest ( NASDAQ: SKYW ) were both upgraded to Buy on Thursday as Deutsche Bank sees “improving ROIC” in 2023.

“For 2022, both airlines produced a ROIC that was middle of the pack and margins that were only slightly better than average among our coverage universe of 13 US airlines,” the bank’s analysts said. “However, we think both carriers could meaningfully outperform the industry in ROIC improvement for 2023–2025 driven by factors unique and relatively impactful to each airline. Historically, we have observed outsized share price performance by airlines that meaningfully improved their ROIC and ROIC – WACC spreads which we believe ALGT and SKYW are currently set up well for that to play out.”

The team raised its price target on Allegiant to $145 from a prior $110 and SkyWest ( SKYW ) to $46 from a prior $19.

The team expects the completion of Allegiant’s Sunseeker Resort, the launch of an antitrust-immunized joint venture with a low fare Mexican carrier, and new aircraft added to the fleet should support upside for Allegiant ( ALGT ). Meanwhile, SkyWest ( SKYW ) is likely to benefit from better pilot hiring trends, easing labor expenses, and balance sheet deleveraging, among other tailwinds.

Shares of both SkyWest ( SKYW ) and Allegiant ( ALGT ) edged higher in premarket trading.

More on Allegiant and SkyWest:

Allegiant reports fall in total system passengers and capacity for May

Allegiant reaches tentative agreement with flight attendants union

SkyWest: Short-Term Headwinds, Time To Take Profits

Michael Burry's Scion sells MGM, Skywest

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