Transportation

Frontier Airlines Started With Mostly Upbeat Sell-Side Coverage

Following an April 1 initial public offering (IPO), Frontier Group Holdings Inc. (NASDAQ: ULCC) stock has added more than 14% and analysts came out today with initial ratings on the stock of the ultra-low priced airline. Most analysts gave the stock the equivalent of a Buy rating.

Cowen initiated coverage on the stock with an Outperform rating and a 12-month price target of $23. Analyst Helane Becker commented: “Frontier is an ultra-low-cost carrier looking to extend its relative cost advantage through continued transition to more efficient, high density aircraft. The company has market expansion in its headlights and the order book to support it. Frontier shares are trading at a relative discount to ultra-low-cost peers.”

Those U.S. peers would be Spirit, Allegiant and Sun Country, and maybe JetBlue and Southwest. Since its IPO, Frontier trades higher than all of those except Sun Country.

UBS analyst Myles Walton also started Frontier with a Buy rating. His price target is $24, and he sees approximately 25% upside to the stock’s current price of around $21. Comparing the airline to its competitors, Walton also commented: “The combination of [Frontier]’s smaller but solid flight network, alongside the ultra low cost market penetration in the early innings, are the key pillars to our positive view on the stock.”

Walton also sees Frontier’s cost structure and non-fare revenue as competitive advantages, boosting double-digit growth in revenue, earnings per share, and free cash flow once the commercial airline industry returns to a “normalized operating environment” after the pandemic-influenced 60% growth rate over 2021 and 2022.

Other brokerage firms initiating coverage on the airline stock included the following:

  • BofA Securities: Neutral with a $22 price target
  • Barclays: Overweight with a $26 price target
  • Citigroup: Buy with a $25 price target
  • Morgan Stanley: Overweight with a $25 price target
  • Deutsche Bank: Buy with a $26 price target
  • JPMorgan: Neutral with a $20 price target

Frontier stock traded up less than 1% Monday, at $21.23 in a post-IPO range of $18.26 to $21.98.