Unpopular Opinion: How to SAVE Your Portfolio?

Unpopular Opinion: Spirit Airlines Stock Might Just be the Craziest (and Smartest) Buying Opportunity Right Now. Whaaaa? Yes, you read that right. Obviously, at first glance this idea might sound as wild as wearing socks with sandals, but the airline that’s known more for its memes than its miles could actually be a hidden gem. Why? 

Source: Giphy

Well here’s the breakdown: 

First things first, it’s very understandable why Spirit Airlines (NYSE: SAVE) is on everyone’s “Do Not Buy” list. The stock has plummeted a whopping 78% this year, even as the S&P 500 has been living its best life with an 11% gain. Ouch, right?

The big heartbreak came when JetBlue called off its proposed merger with Spirit after a federal judge nixed the deal. Investors were hoping this merger would create a low-cost airline powerhouse, but now Spirit’s financial woes are painfully exposed. 

Source: JetBlue

The company reported a hefty $207 million operating loss in the first quarter of 2024, marking its fifth year in a row of losses. Not exactly a confidence booster.

And then there’s the debt. Spirit is lugging around $3.3 billion in long-term debt with just $765 million in cash. That’s like having a maxed-out credit card and only enough cash to buy a pack of gum. Financial risk? You bet. 

But hold up—before you swipe left on Spirit, let’s talk about the potential upside. 

Source: Tenor 

Despite all the doom and gloom, there’s a case to be made for buying Spirit stock, and it involves two words: short squeeze.

Remember the GameStop saga of 2021? Retail investors rallied to squeeze out short sellers, sending the stock price to the moon. Spirit Airlines could be setting up for a similar scenario. Currently, 26.41% of Spirit’s shares are sold short. That’s a lot of pessimism baked into the price, and if things start to look up, those shorts could be in for a world of hurt, leading to a massive price spike.

Source: Reddit 

As we all know, short interest is like the dark side of the stock market. It’s the number of shares sold short but not yet covered. Traders short stocks hoping the price will drop so they can buy back shares at a lower price and pocket the difference. But if the stock price starts to rise, short sellers scramble to cover their positions faster than Hunter Biden deleting his browser history before the FBI shows up - which in turn, drives the price even higher causing a short squeeze.

Source: Giphy

Now keep in mind, Spirit’s short interest is higher than most of its peers, (think only 5% short interest for Southwest and United compared to Spirit’s 26%) making it a prime candidate for such a squeeze. With travel demand continuing to rebound four years into the post-pandemic, there’s a real chance Spirit could see some positive momentum.

I mean if you really step back and think about it… it’s a classic case of an underdog retailer everyone loves to hate. And again, you know who else fits that story? GameStop. Hedge funds shorted it to oblivion, but retail investors on Reddit saw an opportunity. They piled in, and the rest is history. Spirit Airlines could be the next GameStop if enough investors believe in its turnaround potential.

Source: Business Insider

Of course, that’s a perfect world scenario where all the stars align. Because right now, it’s no secret Spirit’s finances are rough. Sales have been declining, and the company hasn’t posted a profit since the pandemic started. It’s burning cash faster than a college kid with his first credit card. But here’s the thing—Spirit’s dirt-cheap valuation could mean there’s more upside than downside.

The stock trades at a price-to-sales ratio of just 0.076. For context, that’s like finding a vintage Rolex at a garage sale price. Even a slight improvement in Spirit’s financial situation could lead to massive returns. 

And yes, while the Spirit’s massive $3 billion debt load is scary, management is (apparently) working on cost-cutting measures and talking to bondholders to stave off default. If they can pull it off, Spirit could get some much-needed breathing room.

Source: Giphy

So, why should investors consider looking at Spirit Airlines stock? Because it’s cheap. Like, really cheap. And sometimes, being a contrarian pays off big time. If Spirit can stabilize its finances and capitalize on the rebound in travel demand, the upside could be huge. Plus, the potential for a short squeeze adds an extra layer of excitement.

Now before a buying frenzy kicks off, buying Spirit Airlines isn’t for the faint of heart. There’s a lot of risk involved, and the company has a long way to go to prove it can turn things around. But for those willing to take a chance, the rewards could be substantial. It’s like anything in life—sometimes you’ve gotta risk it for the biscuit, whether it's investing in a sketchy stock or texting your ex at 2 AM.

So, while everyone else is avoiding Spirit like a middle seat on a long flight, you might want to consider buying a ticket. It could be the best comeback story this year. But just remember, to hold onto your cowboy hat… because it could get wilder than your drunk uncle at a family wedding. 

Source: Yahoo 

Stocks.News holds positions in United Airlines as mentioned in the article.