ULCC Stock Forecast & Price Target

Frontier Group Holdings has demonstrated a strong business performance, particularly benefiting from its significant operations in Florida, which contributes approximately 30% to its overall flights, amidst a 22% increase in industry supply since 4Q19. Additionally, the company's co-brand loyalty revenue per passenger has surged by 40% year-over-year, reflecting enhanced card acquisition efforts and increased spending. Overall, the growth in industry supply in key markets such as Denver, Orlando, Phoenix, and Miami—up over 20% compared to 2019—further positions Frontier favorably within the competitive landscape of ultra-low-cost carriers.

Frontier Group Holdings faces significant challenges that contribute to a negative outlook on its stock, highlighted by a pre-tax margin of -7.5%, a sharp decline from the previous year's 3.3% profitability. Concerns regarding the company's growth are exacerbated by ongoing losses, unsettled labor contracts, and excessive leverage at 5x the projected 2025 EBITDAR, all fostering uncertainty about future revenue and profit stability. Additionally, the company's valuation multiple has contracted due to frequent earnings disappointments and perceived risks in its competitive positioning within the ultra-low-cost carrier market.