Spirit Airlines stock experienced a significant 53% jump on Monday, driven by an extension the company received to refinance its massive debt. Despite the impressive gain, the stock is still down 86% year-to-date, making it somewhat of a risky investment.
This year has been tough for Spirit Airlines, beginning with the failed merger with JetBlue Airways in January. The stock plummeted from $16 to below $5 per share as the airline struggled with billions in debt and consistent net losses. Rumors of bankruptcy began circulating earlier this month as debt refinancing negotiations hit roadblocks.
However, news of an extension from the company’s bondholder on Monday provided a glimmer of hope. Spirit now has until December 23 to reach a deal to refinance $1.0 billion in loyalty bonds set to mature next year. While this provides some breathing room, it doesn’t solve the airline’s underlying issues.
Despite borrowing $300 million from its revolving credit facility and expecting over $1.0 billion in liquidity by the end of the year, Spirit Airlines still faces significant challenges. Investors are warned to approach cautiously with this penny stock even after a potential debt refinancing deal is in place. Most analysts have a sell rating on the stock with a price target of $2.00 per share, indicating that while it may be cheap, it is not a good value at this time.
In conclusion, Spirit Airlines saw a remarkable surge in its stock price on Monday, thanks to an extension for debt refinancing. However, the airline still grapples with significant debt and financial challenges, making it a risky investment. Investors are urged to proceed with caution and await a concrete debt refinancing agreement before considering purchasing Spirit Airlines stock.
