Citi Raises Price Target for Frontier Group Holdings Inc. as Airline Sees Improved Operational Performance
Citi, a leading global bank, has increased its price target for Frontier Group Holdings Inc (NASDAQ:ULCC) to $8.00, up from the previous target of $4.75. Despite the increase, Citi has maintained a Neutral rating on the stock.
This revision comes as Frontier Airlines, a subsidiary of Frontier Group Holdings Inc, continues to exceed market expectations with its improved operational performance. The airline has been implementing a new route strategy, moving away from some leisure markets and focusing on routes that offer higher fare potential. This strategic shift aims to bring the ultra-low-cost carrier closer to achieving its operational objectives.
However, Citi remains cautious in its assessment of Frontier Airlines, citing several factors that could impact its financial performance. One concern is the possibility of the airline triggering fare wars with larger competitors. Another factor is the stability of fuel prices, which will be crucial for Frontier to maintain its profitability.
While Citi recognizes the positive impact of Frontier’s operational strategy, the bank highlights some areas of concern. Compared to competitors like Delta, Frontier has a less robust free cash flow profile. Additionally, Citi points out that Frontier’s financial reporting includes sale-leaseback gains in its EBIT calculations, which may overstate the airline’s operational profitability compared to other U.S. peers.
Despite these reservations, Citi’s updated price target suggests a more optimistic view of Frontier’s potential to achieve its operational goals under its current strategy. However, the bank’s neutral stance indicates that there are still risks that could affect the airline’s financial performance.
Investors and market watchers will closely monitor how Frontier’s strategic route changes impact its market position and whether the airline can sustain its operational trajectory without adverse effects from competition and fuel price volatility. With its improved operational performance, Frontier Group Holdings Inc continues to generate interest and attention in the market.
Analyst comment
Positive news. The market is likely to react positively to Citi’s increased price target for Frontier Group Holdings Inc. The improved operational performance and strategic route changes suggest that Frontier has the potential to achieve its goals. However, investors will closely monitor competition and fuel price volatility, which could impact the airline’s financial performance.
