10 Worst Airline Stocks To Buy According to Short Sellers

3. Allegiant Travel Company (NASDAQ:ALGT)

Short Interest as % of Shares Outstanding: 10.77%

Number of Hedge Fund Holders: 17

Allegiant Travel Company (NASDAQ:ALGT) is a major U.S. airline, headquartered in Las Vegas, Nevada. It is known for its ultra-low-cost business model. The airline focuses on serving underserved leisure markets and connects smaller and medium-sized cities to popular vacation destinations. The company uses a fee-based revenue structure, according to which it keeps base fares low while offering several add-on services such as seat selection, baggage handling, and food purchases.

Allegiant Travel’s (NASDAQ:ALGT) ancillary revenue is one of the most attractive features of its business model, which includes fees for services beyond just the ticket price. The approach has helped the airline maintain profitability while keeping base fares competitive. It also partners with hotels, car rental services, and tourist attractions and offers bundled travel packages.

On September 20, Allegiant Travel (NASDAQ:ALGT) raised it Q3 outlook based on its August performance. Chief Commercial Officer Drew Wells reported stronger-than-expected demand and unit revenue for late September, with third-quarter unit revenues showing a 5.5% year-over-year decline, an improvement from the earlier forecast of a 7.5% decline.

The company’s CFO, Robert Neal said that non-fuel unit costs for Q3 increase is expected to be 4.5%, which is 2.5% lower than expected. Fuel costs for the quarter are expected to average $2.70 per gallon, down from $2.80.

Allegiant Travel (NASDAQ:ALGT) expects its August capacity to be up around 1.8%, compared to previous forecasts of 1.3%. In August, the company updated Q3 guidance, which shows a 1.8% year-over-year rise in system available seat miles (ASMs), with scheduled service ASMs up 1.6%. The company anticipates an operating margin between -0.5% and -1.5%, and EPS excluding special charges, is projected to range between -$0.75 and -$1.25, compared to the previously forecasted range of -$1.50 to -$2.50.

However, even with a positive outlook, some analysts remain bearish on Allegiant Travel’s (NASDAQ:ALGT) stock. On September 21, TipRanks reported that Bank of America Securities analyst Andrew Didora reiterated a Sell rating on the company with a $40 price target. Despite its positive update on third-quarter guidance, including better-than-expected revenue and cost control, the analyst remains skeptical.

The analyst stated concerns over its unique route network, high expenses from new pilot agreements, and the costly Sunseeker project. Despite lower fuel costs, the company’s financial challenges and high debt levels contribute to his bearish outlook.

In Q3, 17 hedge funds had stakes worth $111.800 million in Allegiant Travel (NASDAQ:ALGT). With 945,839 shares worth $47.51 million, Diamond Hill Capital is the company’s largest shareholder as of Q2.