ULCC Stock Forecast & Price Target

Frontier Group Holdings Inc. has demonstrated a strong operational leverage, especially in Florida, where approximately 30% of its flights are concentrated, coinciding with a 22% increase in industry supply compared to 4Q19. The company has also shown impressive growth in co-brand loyalty revenue, reporting a substantial 40% year-over-year increase driven by greater card acquisition and spending. Additionally, significant increases in industry supply in key markets such as Denver, Orlando, Phoenix, and Miami—exceeding 20% compared to 2019—position Frontier favorably within the competitive landscape of air travel.

Frontier Group Holdings is facing significant challenges that have led to a negative outlook on its stock, primarily due to concerns over its current and future profitability. The company has experienced a sharp contraction in its pre-tax margin, falling to -7.5% compared to 3.3% a year ago, alongside a high leverage ratio of 5x projected EBITDAR for 2025, which raises doubts about its ability to manage costs and generate sustainable revenue. Additionally, uncertainties related to false earnings starts, continued operational losses, and unresolved labor contracts contribute to a precarious financial position that could hinder growth and profitability in the near future.