Goldman Sachs says Allegiant Travel remains a winner after completing its acquisition of Sun Country Airlines. The bank this week upgraded its deal with the airline from neutral. The $125 price target implies a 30% upside from Wednesday’s closing price. Allegiant Airlines announced in January that it would acquire Sun Country in a $1.5 billion cash and stock deal. CEO Gregory Anderson said in a press release that combining the two affordable airlines will create a “more differentiated and durable airline.” Stocks are already outperforming, up 18.5% this year, while the S&P 500 index is up only about 10%. And Goldman analyst Catherine O’Brien believes the deal will provide further growth opportunities for the company. ALGT YTD Line Allegiant Travel Company is growing 18.5% this year “This merger leverages a unique fuel hedge at an attractive valuation and provides an opportunity for incremental, profitable growth towards an improved competitive landscape in our industry,” he said in a note to clients dated Tuesday. Allegiant and Sun Country will have a combined fleet of 195 aircraft. O’Brien noted that the increased fleet will allow both companies to use their aircraft more efficiently, and that Allegiant’s recent purchase of a Boeing 737 will allow Sun Country to use Allegiant’s aircraft for its own flights, creating a larger network. Closing Spirit will also give the new Allegiant more pricing power, Goldman said. “Because price-sensitive customers are more likely to be flexible with flight times, we believe that even if[Spirit]only served a market once a day,[Spirit]influenced pricing in that market throughout the day,” O’Brien elaborated. The analyst added that Allegiant has unique hedges against fluctuating jet fuel prices, which have been volatile due to attacks in the Middle East. Analyst opinions on the stock are generally divided. According to LSEG data, six of the 12 companies it covers have ratings of “buy” or “strong buy.” The remaining six assigned a rating equal to Hold.
