Spirit Airlines (NYSE: SAVE) stock price has become toxic and unwanted this year. It has crashed by over 76% this year and by over 92% in the past decade. It is down by over 95% from its all-time high of $77 in 2014, meaning that $10,000 invested at the time would now be worth about $485.
Spirit Airlines shares continued their sell-off after its $3.8 billion merger with JetBlue ended. In the aftermath, the company received about $69 million in breakup fees. These funds were not enough to ameliorate its recent pain.
Why SAVE stock has plunged
Investors are concerned about three key things. First, there are concerns about its material debt, which stands at over $3.1 billion. This is a significant amount for a company that has market cap of less than $410 million.
Worse, the company faces debt maturities worth of $2 billion in the next two years. If its current business trends continue, there is a significant risk that the company will default on its obligations unless it manages to renegotiate and extend these maturities.
Second, its fundamentals are not all that good as its competition rises. The most recent financial results showed that its revenue dropped by 6.2% YoY to over $1.26 billion. Its Total Revenue per Available Seat Mile (TRASM) came in at 9.38 cents, down by about 8.2%.
Worse, the company continued its loss-making streak. Its net loss came in at $145 million in the last quarter, a big increase from the $103 million it made in 2023. It has lost over $1.9 billion in the last four straight years and the situation will likely continue worsening.
Third, Spirit Airlines is facing strong competition from big airline companies like United, American Airlines, and Delta, which are increasing their focus on the regional sector. This is a major issue that could see more customers use them because of their royalty programs.
Additionally, some of the company’s planes will be idled as Pratt & Whitney does maintenance. While Spirit will receive compensation of between $150 million and $200 million, the process will likely lead to market share losses.
Therefore, with Spirit Airlines, we have a company whose revenue is falling and one that has continued to generate substantial losses. Its equity value has moved to $409 million, making it difficult to do an At the Market (ATM) capital raise. All this makes it a high-risk investment to consider.
Spirit Airlines stock price forecast
Turning to the weekly chart, we see that the SAVE stock price has been in a strong sell-off for a long time. It has now crashed below the crucial support level at $6.36, its lowest swing in March 2020.
The stock has also moved below the lower side of the descending channel shown in green and the 50-week and 25-week moving averages. Therefore, I suspect that it will continue falling as sellers target the support at $3.0.
However, it is still highly risky to place a short trade on Spirit Airlines because it can be a good candidate for a short-squeeze as we saw with Faraday Futureand GameStop.
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