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Category: Stock Market and Allegiant
Date: 13 May 2020 Stock Price: $73.20 We take a look at the 1st quarter earnings release of their 2020 fiscal year of Allegiant Travel Company, owner of Allegiant Air. The group' stock price has been hit hard due to the impact of Covid-19 on travel and leisure activities.
The events that have unfolded over the last eight weeks are truly unprecedented," stated Maurice J. Gallagher, Jr., chairman and CEO of Allegiant Travel Company. " |
About Allegiant Travel Company
Las Vegas-based Allegiant (NASDAQ: ALGT) is an integrated travel company with an airline at its heart, focused on connecting customers with premier leisure experiences - from vacations to hometown family entertainment. Since 1999, Allegiant Air has linked travelers in small-to-medium cities to world-class vacation destinations with all-nonstop flights and industry-low average fares. Today, Allegiant's all-Airbus fleet serves communities across the nation, with base airfares less than half the cost of the average domestic roundtrip ticket. For more information, visit us at Allegiant.com.
Overview of Allegiant's 1st quarter 2020 earnings report
The data below refers to the most recent quarter unless specified otherwise:
- Revenues: $489.101 million (down from $451.622 million for the same quarter of the previous year)
- Revenue decreased by -9.4% over the last 12 months
- Total operating expenses : $526.986 million (up from $360.544 million for the same quarter of the previous year)
- Total operating expenses increased by 46.2% over the last 12 months
- Massive margin pressure for Allegiant Travel with their revenues declining at a slower rate than their operating expenses
- Net loss: -$117.805 million (down from $91.078 million for the same quarter of the previous year)
- Diluted loss per share: -$2.08 (down from earnings of $3.52 for the same quarter of the previous year)
- PE ratio of Allegiant Travel : Since the group is making a loss a PE ratio cannot be calculated
- Diluted weighted-average shares outstanding: 15.952 million (down from 16.103 million for the same quarter of the previous year)
- Cash and cash equivalents: $138.4 million
- Cash and cash equivalents per share: $8.67
- Cash and cash equivalents makes up 11.8% of Allegiant Travel's market capital
- Stockholders equity in Allegiant Travel: $809.9 million
- Stockholders equity per share: $50.77
- So Allegiant Travel is trading at 1.44 times its stockholders equity per share, which is outside the expected range of between 2 and 4 times that most firms tend to trade at.
- For perspective the average price to book value of firms in the S&P 500 is 3.7 times. Read more about the S&P500 here
Allegiants's management commentary on their 1st quarter 2020 earnings report
LAS VEGAS, May 12, 2020 /PRNewswire/ -- Allegiant Travel Company (NASDAQ: ALGT) today reported the following financial results for the first quarter 2020:
"The events that have unfolded over the last eight weeks are truly unprecedented," stated Maurice J. Gallagher, Jr., chairman and CEO of Allegiant Travel Company. "We began to see the first signs of demand weakness at the end of February, with a steep downward demand trajectory by mid-March. Despite March revenues down nearly 40 percent year over year, we finished the quarter with airline-only EPS of $1.89 per share and an airline-only operating margin of 12.6 percent. These numbers are a true testament to the flexibility of our model and our ability to right-size capacity quickly and seamlessly.
"Since the onset of the pandemic, we have been laser-focused on ensuring the health and safety of our employees and passengers. Enhancing our cleaning procedures, adding health precautions and employing smart principles of social distancing, we recently launched our Going the Distance for Health and Safety initiative as a resource to customers, the details of which can be found in the bullets below. It outlines a set of principles which are as much a part of our DNA as flying from small cities to vacation destinations. These principles are designed to evolve with travel needs, as a permanent part of our operation.
"The events that have unfolded over the last eight weeks are truly unprecedented," stated Maurice J. Gallagher, Jr., chairman and CEO of Allegiant Travel Company. "We began to see the first signs of demand weakness at the end of February, with a steep downward demand trajectory by mid-March. Despite March revenues down nearly 40 percent year over year, we finished the quarter with airline-only EPS of $1.89 per share and an airline-only operating margin of 12.6 percent. These numbers are a true testament to the flexibility of our model and our ability to right-size capacity quickly and seamlessly.
"Since the onset of the pandemic, we have been laser-focused on ensuring the health and safety of our employees and passengers. Enhancing our cleaning procedures, adding health precautions and employing smart principles of social distancing, we recently launched our Going the Distance for Health and Safety initiative as a resource to customers, the details of which can be found in the bullets below. It outlines a set of principles which are as much a part of our DNA as flying from small cities to vacation destinations. These principles are designed to evolve with travel needs, as a permanent part of our operation.
"In addition to health and safety enhancements, we took early and decisive action to preserve liquidity and reduce cash burn. These measures, outlined below, have brought immediate and significant progress over the past few weeks. Most notably, more than 25 percent of our team members have strengthened these efforts by participating in voluntary leave and pay reduction programs. I am humbled by their generosity and personal investment in our company. These investments will help preserve jobs and the company alike. The effect of these combined liquidity preservation measures has reduced daily cash burn to roughly $2.1 million a day, in a matter of a few weeks.
"As previously reported, we will receive $172 million in payroll support under the CARES Act, of which $86 million has been received to date, with the remainder being paid in installments. In addition, we will receive nearly $100 million in federal income tax refunds during the second quarter of 2020 related to favorable net operating loss (NOL) carryback rules as outlined by the CARES Act. We anticipate another projected $100 million or more early next year related to 2020 expected losses and capital expenditures. I look at this very material $200 million plus in federal income tax refunds as our 'equity' offering other carriers are currently pursuing in the market. With these refunds and our aggressive cost and capital expenditure savings, we believe we have sufficient liquidity going forward. Should we project a need for additional funds, we have up to $276 million of dry powder available through the end of September from the CARES Act loan program.
"Near term is painful and will continue to be painful. But I believe our model, given the current economic impact, is best-suited to withstand the brutal impact from this pandemic. In the near term, we will most likely shrink our fleet by as many as 25 aircraft. These aircraft, particularly the motors, will 'seed' our near and long-term ability to materially reduce planned engine overhauls, beginning in 2020 and for years thereafter. Going forward, the market will favor buyers, not sellers as has been the case the past few years. We will be able to use our expertise, as we did with the MD80s, to purchase aircraft and associated parts at what we believe will be substantial discounts to recent prices. We will 'manage' planned overhauls via our balance sheet versus expensive overhaul shop visits. Another substantial advantage is that we do not have meaningful aircraft purchase commitments in 2021 and beyond. The combination of our retirements and the greatly reduced cost of used aircraft and their motors is a key part of both our near-term liquidity benefit and long-term - 2021 and beyond - reduced capital requirements for our growth. Finally, I am reminded of a saying I used with our MD80s, namely 'we were a non-capital-intensive business in a capital-intensive industry.'
"Going forward, we are prepared to make tough choices and take any steps necessary to adapt and right-size our cost structure. Since the outset of the COVID-19 crisis, we have taken proactive measures to adjust quickly and aggressively to meet the demands of this challenging and changing environment. With that said, our low-cost business model has proven its resilience during past economic downturns, and we expect it will support our ability to rebound here as well. The Allegiant model, based on simplicity, flexibility and optionality is well-suited for these difficult environments."
"As previously reported, we will receive $172 million in payroll support under the CARES Act, of which $86 million has been received to date, with the remainder being paid in installments. In addition, we will receive nearly $100 million in federal income tax refunds during the second quarter of 2020 related to favorable net operating loss (NOL) carryback rules as outlined by the CARES Act. We anticipate another projected $100 million or more early next year related to 2020 expected losses and capital expenditures. I look at this very material $200 million plus in federal income tax refunds as our 'equity' offering other carriers are currently pursuing in the market. With these refunds and our aggressive cost and capital expenditure savings, we believe we have sufficient liquidity going forward. Should we project a need for additional funds, we have up to $276 million of dry powder available through the end of September from the CARES Act loan program.
"Near term is painful and will continue to be painful. But I believe our model, given the current economic impact, is best-suited to withstand the brutal impact from this pandemic. In the near term, we will most likely shrink our fleet by as many as 25 aircraft. These aircraft, particularly the motors, will 'seed' our near and long-term ability to materially reduce planned engine overhauls, beginning in 2020 and for years thereafter. Going forward, the market will favor buyers, not sellers as has been the case the past few years. We will be able to use our expertise, as we did with the MD80s, to purchase aircraft and associated parts at what we believe will be substantial discounts to recent prices. We will 'manage' planned overhauls via our balance sheet versus expensive overhaul shop visits. Another substantial advantage is that we do not have meaningful aircraft purchase commitments in 2021 and beyond. The combination of our retirements and the greatly reduced cost of used aircraft and their motors is a key part of both our near-term liquidity benefit and long-term - 2021 and beyond - reduced capital requirements for our growth. Finally, I am reminded of a saying I used with our MD80s, namely 'we were a non-capital-intensive business in a capital-intensive industry.'
"Going forward, we are prepared to make tough choices and take any steps necessary to adapt and right-size our cost structure. Since the outset of the COVID-19 crisis, we have taken proactive measures to adjust quickly and aggressively to meet the demands of this challenging and changing environment. With that said, our low-cost business model has proven its resilience during past economic downturns, and we expect it will support our ability to rebound here as well. The Allegiant model, based on simplicity, flexibility and optionality is well-suited for these difficult environments."
Allegiant Travel Company (NASDAQ: ALGT) stock price history
The image below, obtained from Google, shows the stock price history of Allegiant Travel Company (NASDAQ: ALGT) over the last 5 years. And it's not been a good time for Allegiant stockholders. 5 years ago the stock of Allegiant was trading at $166 and its currently trading at $73.20. Thats a loss of -55.9% suffered by Allegiant stockholders
Allegiant stock is trading at closer to its 52 week low of $60.06 than it is from its 52 week high of $183.26 which to us is a clear indication that the short term sentiment and momentum of Allegiant stock is very negative at this point in time.
Allegiant stock is trading at closer to its 52 week low of $60.06 than it is from its 52 week high of $183.26 which to us is a clear indication that the short term sentiment and momentum of Allegiant stock is very negative at this point in time.
Recent Google search trends for ALGT stock price
The graphic below shows the Google search trends for LGT stock price over the last 12 months in the United States as obtained from Google Trends. As the graphic shows interest in the search term ALGT stock price started picking up since early March 2020, which coincides with a significant decline in the group's stock price.
Recent coverage of Allegiant Travel
The extract below shows recent coverage of Allegiant as obtained from Las Vegas Review Journal
After 17 straight profitable years, Allegiant Air’s parent company posted a loss last quarter as the coronavirus pandemic devastated the travel industry. Las Vegas-based Allegiant Travel Co. on Tuesday reported a $33 million loss in the three months ended March 31, compared to a $57.1 million profit the same period last year.
Revenue dropped 9.4 percent to $409.2 million as passenger totals fell 8 percent to almost 3.2 million. But its balance sheet was clobbered by a $163 million write-off of its nonairline businesses.
Read the full article here
After 17 straight profitable years, Allegiant Air’s parent company posted a loss last quarter as the coronavirus pandemic devastated the travel industry. Las Vegas-based Allegiant Travel Co. on Tuesday reported a $33 million loss in the three months ended March 31, compared to a $57.1 million profit the same period last year.
Revenue dropped 9.4 percent to $409.2 million as passenger totals fell 8 percent to almost 3.2 million. But its balance sheet was clobbered by a $163 million write-off of its nonairline businesses.
Read the full article here
Allegiant (NASDAQ: ALGT) latest stock valuation
So based on Allegiant's 1st quarter 2020 earnings report what do we value Allegiant Travel stock at? Based on their latest earnings report of Allegiant Travel and the fact that they are currently loss making we value the stock of Allegiant Travel at their stockholders equity per share. We therefore value the group stock at $50.77 a stock
We therefore believe that the stock of Allegiant is overvalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $50.77. A good entry price into Allegiant stock would therefore be at $45.70 or below.
We expect the stock of Allegiant Travel to pull back from current levels to levels closer to our target price in coming weeks and months
We therefore believe that the stock of Allegiant is overvalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $50.77. A good entry price into Allegiant stock would therefore be at $45.70 or below.
We expect the stock of Allegiant Travel to pull back from current levels to levels closer to our target price in coming weeks and months
Next earnings release of Allegiant Travel Company
It is expected that Allegiant will release their 2nd quarter 2020 earnings release in mid August 2020