Can Spirit Airlines Pull Off a Carvana-Style Turnaround After a 90% Drop?

If you thought Spirit Airlines had already reached rock bottom, think again. Two weeks ago, Spirit’s stock crashed and burned 28% as Wall Street started whispering about the “B” word (no, not the last season of “Billions” —bankruptcy). It was a cliffhanger that had investors on the edge of their seats, eagerly awaiting the next episode of Spirit Airlines: How Low Can You Go?. 

Just yesterday, Spirit Airlines announced that it struck a last-minute deal with its credit card processor to push back its debt refinancing deadline to December. And by last minute, I mean hours before they would’ve missed the deadline and potentially triggered even more chaos. Talk about cutting it close. 

In a late Friday filing, Spirit revealed that earlier in the week, they tapped into the entirety of their $300 million revolving credit facility. Now, they’re expecting to finish the year with just over $1 billion in liquidity. Apparently, Spirit Airlines has their PhD in kicking the can down the road.

Spirit’s shares have plummeted over 90% in 2024. The stock now hovers at less than $1.50 per share, a far cry from its former glory. Just this month alone, the stock has dropped another 41%.

To make matters worse, Spirit’s profit margins are taking a beating. The airline furloughed workers, delayed aircraft deliveries, and deferred anything remotely expensive just to keep the lights on. Oh, and thanks to some Pratt & Whitney engine recalls, a bunch of their planes are grounded. (Because, obviously, who needs working planes when you’re an airline?) It’s not like passengers were clamoring to book flights either—weak bookings were the icing on the cake of this disastrous year. The proposed JetBlue acquisition also hit the rocks after a federal judge blocked it, thanks to antitrust concerns.

Meanwhile, in a parallel universe, Spirit is out here trying to convince people that flying with them is comfy. (Yep, you heard that right—the airline famous for its no-frills approach wants you to believe it’s cozy.) They even roped in Frankie Muniz (aka Malcolm from Malcolm in the Middle) to star in an ad campaign for their Go Comfy option. The big selling point? A blocked middle seat. (Because that’s exactly what’ll make people forget the company might go belly-up: a little extra elbow room.) Sure, that sounds nice, but will it distract passengers from the fact that Spirit’s finances are circling the drain? Highly doubtful.

Believe it or not, Spirit Airlines might be one of those “so bad, it’s good” plays right now. After all, when a stock crashes over 90% in a year and is now trading below $1.50 per share, you can’t help but wonder if this is one of those dirt-cheap, buy-the-dip moments that everyone talks about. As of today, Spirit’s market cap is sitting at around $155 million (a long way away from its glory days when the company was valued at $6 billion).

Let’s look at the numbers. Spirit reported a loss of $1.36 per share in its latest earnings report, a significant drop from a $0.43 per share profit it posted back in 2019. Those losses are nothing to sneeze at, but here’s the thing, Spirit expects to end the year with over $1 billion in liquidity after tapping into its $300 million credit facility. While the current financials are ugly, that liquidity gives Spirit time to turn things around and figure out a debt restructuring plan.

Remember Carvana? The company lost nearly all of its value, plummeting from $360 a share to under $5 in late 2022. Investors had all but written them off for dead. But then, Carvana made a stunning comeback, climbing back to around $50 per share in 2023 after positive news about restructuring deals and improved profitability. Sure, the situations aren’t identical, but if we learned anything from Carvana, it’s that when a stock hits rock bottom, there’s often a lot more room to go up than down.

At these depressed levels, any positive catalyst (whether it’s a successful debt restructuring, better-than-expected bookings, or even renewed talks of a merger) could send Spirit’s stock soaring again. It’s not a sure thing, but it’s the classic high-risk, high-reward play: buy low, wait for any good news, and potentially ride a massive rebound.

P.S. Yeah, I know it’s the weekend and you’re probably gearing up for a pumpkin patch trip with the family, but hang on—you need to know this. Wednesday’s alert went up 203%! $QNRX blew up, and premium subscribers snagged it at $0.51 before it shot up to $1.56 in under four hours. Don’t miss the next one—click here now, then you can get back to pretending you’re excited about hayrides.

Stock.News does not have positions in companies mentioned.