Spirit stock down way more than competitors?
 

Any idea why our stock is down WAY more than competing airlines? Obviously everyone is taking a huge hit for the coronavirus, but why is Spirit doing the worst? I personally felt we were in a somewhat decent position comparatively to weather this storm.
I admit, I'm not the most savvy when it comes to anything Wall St. related, but this is a bit concerning, is it not?

In the past month, this is how aviation stocks have fared:

SAVE down 66%
DAL - 35%
LUV - 29%
ALGT - 32%
JBLU - 48%
AAL - 52%
HA - 50%
UAL - 48%
ALK - 42%

I had the same thought. I just don’t get it.

Puzzling. We have more cash than the stock is worth. Seems like a good buy but it feels like the massive spread of this virus is just beginning and it is possible for domestic airlines to shut down for a while till this all settles.

I’m keeping as much cash on hand as possible to try and survive this.

Somebody once told me that a lot of people get us mixed up with Spirit Aerospace (the company that makes aircraft parts) so that could have something to do with it.

Again today, we’re down more than our peers. Our balance sheet looks so much better than some competitors... doesn’t make sense. Obviously no one wants to touch this sector right now, but a multi billionaire could potentially buy us with play money (Though I don’t see that happening).

Leverage and overall sentiment. Investors havent been comfortable with SAVEs debt for some time now. Just because Ted says all is well doesn't mean investors have to agree.

A large portion of trading these days is done not by analytical humans comparing business strategies and balance sheets, but algorithms that make trades based on trends, volumes, and industries as a whole. If a few large pension funds or index funds decide to dump travel/airline stocks as a whole, that volume will trigger more sell offs. As a smaller company, such trading has a multiplied effect. (This is also one of the reasons we have the “circuit breakers” so that computer algorithms don’t tank the market cascading massive and continuous reactionary sell offfs)

The market price is generally based on perception, not reality. Personally, I think it's a steal at $20, at $12, it is stealing. With that said, I am going to wait things out before buying more.

I'm not an investing expert by any means, so take this with a grain of salt.


From Spirit's 2019 10-K:

Spirit has $1.55B in contractual obligations due for 2020. This does not include the cost of operations, just debt principal, interest, aircraft leases, and aircraft purchase obligations. So while the ~$1.1B in cash/short term investments on hand looks good, it's not enough to satisfy the debt obligations the company has for an entire year even if the airline did not have to consider things like fuel, labor, landing fees, taxes, etc.


To put that in comparison, from SWA's 2019 10-k.

SWA has $3.6B in contractual obligations. However, over $2b of that is aircraft orders (max) which they may not be obligated to pay for considering the aircraft is un-airworthy. Regardless, even if they did take the entire order they have ~$4.0B in cash/short term investments on hand.


More food for thought is how leveraged the aircraft are at each company. While for example Delta is indeed parking aircraft, it's because they have the luxury of having a paid off fleet and can downsize as necessary. I can't say for certain but I would imagine the most of the newer fleet at Spirit would be leased/mortgaged thus requiring payment whether or not an aircraft is generating revenue. Obviously not something great for business if demand falls to nearly 0.


Lastly, I think there is also an investor perception that the government would be more apt to help SWA or the big 3 versus something like Spirit/Frontier... but that's just a wild guess.


That is my best guess as to what I think Wall Street is seeing. In my personal opinion I think SAVE is tremendously undervalued overall though. I think the business model is robust and I also think the type of passengers will be quicker to bounce back versus the business travelers that the big 3 rely on to generate the most revenue. I also believe that even if we ban domestic travel for 30 days, the spool up will go back to normal a lot quicker than most downturns we've seen in the industry based on the fact that this is just a consumer fear issue that hopefully will be resolved if this gets under control.