While the airline industry is expected to report profits this year for the first time since the pandemic, it's short-term prospects look uncertain. Unpredictable factors such as oil costs and extreme weather patterns will continue to threaten the industry.
The industry faces tough macroeconomic and geopolitical headwinds that are raising questions about the longevity of the travel boom and the strength of the industry's recovery.
High inflation, rising interest rates, higher jet fuel prices, and supply chain woes are expected to dampen the airline and space industries’ near-term performance. Space companies have witnessed dwindling investments weighed down by the macro issues.
Given this backdrop, fundamentally weak airline/space stocks Spirit Airlines, Inc. (SAVE), Virgin Galactic Holdings, Inc. (SPCE), and Astra Space, Inc. (ASTR), which are likely to continue to struggle this year, might be best avoided.
Spirit Airlines, Inc. (SAVE)
SAVE is an airline service provider that connects 85 destinations in 16 countries across the United States, Latin America, and the Caribbean. It sells tickets via its call centers, airport ticket counters, and several third parties, including online, traditional, and electronic global distribution channels.
SAVE’s forward EV/EBIT of 35.75x is 130.2% higher than the industry average of 15.53x. Its forward non-GAAP P/E multiple of 35.63 is 101.4% higher than the industry average of 17.69.
SAVE’s total operating expenses increased 61.8% year-over-year to $1.70 billion during the fourth quarter that ended December 31, 2022. The company’s net loss increased 210.5% year-over-year to $270.66 million, and net loss per share increased 211.3% year-over-year to $2.49.
Street expects SAVE’s EPS to be negative $0.48 for the current fiscal quarter ending March 2023. Its revenue is expected to be $1.36 billion for the same quarter.
The stock has declined 24.7% over the past year to close its last trading session at $19.19.
SAVE’s POWR Ratings reflect this bleak outlook. The stock has an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
SAVE is also graded a D in Sentiment and Quality. It is ranked #27 out of 29 stocks in the Airlines industry.
In addition to the POWR Rating grades we’ve stated above, SAVE’s rating for Growth, Momentum, Value, and Stability can be seen here.
Virgin Galactic Holdings, Inc. (SPCE)
SPCE focuses on the development, manufacture, and operation of spaceships and related technologies for conducting commercial human spaceflight and flying commercial research and development payloads into space. It is also involved in the ground and flight testing and post-flight maintenance of its spaceflight system vehicles.
SPCE’s forward EV/Sales of 681.55x is significantly higher than the industry average of 1.83x. Its forward Price/Sales multiple of 1032.29 is significantly higher than the industry average of 1.42.
During the fiscal third quarter that ended September 30, 2022, SPCE’s revenue declined 70.3% year-over-year to $767 thousand. Its adjusted EBITDA decreased 89.8% year-over-year to negative $128.52 million. Net loss widened 200.9% year-over-year to $145.55 million, while its net loss per share increased 71.9% year-over-year to $0.55.
SPCE’s revenue is expected to be $372.62 thousand in the fourth fiscal quarter that ended December 2022. Its EPS is expected to decline 68.2% year-over-year to negative $0.52 for the same quarter. Also, the stock has failed to surpass the consensus EPS estimates in three of the trailing four quarters.
The stock has plunged 29.3% over the past year to close the last trading session at $6.37.
It’s no surprise that SPCE has an overall rating of F, which translates to a Strong Sell in our POWR Ratings system.
SPCE has an F grade for Stability, Sentiment, and Value and a D for Quality and Growth. It is ranked last in the same industry.
Click here to see the POWR Ratings of SPCE (Momentum).
Astra Space, Inc. (ASTR)
ATR, a space launch company, designs, tests, manufactures, and operates launch services, and space products and services. The company also designs, tests, manufactures, and operates propulsion modules to enable satellites to orbit in space.
ASTR’s forward Price/Sales multiple of 12.49 is 790% higher than the industry average of 1.40.
ASTR’s revenue amounted to $2.78 million in the third quarter that ended September 30, 2022. Its adjusted net loss rose 31.2% year-over-year to $45.20 million. Adjusted EBITDA decreased 25.9% year-over-year to negative $41.40 million. Its loss per share increased significantly year-over-year to $0.75.
Analysts expect ASTR’s EPS to decline 9.6% year-over-year to negative $0.74 for the fiscal year 2022. Its revenue is expected to be $12.52 million for the year.
The stock has lost 82.8% over the past year to close the last trading session at $0.59.
ASTR has an overall D rating, which equates to a Sell in our proprietary rating system.
It also has an F grade for Stability and a D for Quality. ASTR is ranked #28 in the same industry.
To access the additional ratings for ASTR for Growth, Value, Sentiment, and Momentum, click here.
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SAVE shares were trading at $19.05 per share on Tuesday afternoon, down $0.14 (-0.73%). Year-to-date, SAVE has declined -2.21%, versus a 4.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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