11 Worst Aviation Stocks to Buy According to Analysts

4. Frontier Group Holdings, Inc. (NASDAQ:ULCC)

Average Analyst Price Target Upside as of September 16: -8.47%

Number of Hedge Fund Holders: 16

Frontier Group Holdings, Inc. (NASDAQ:ULCC) is a holding company that offers passenger air transportation services through its subsidiaries. Frontier Airlines operates a fleet of over 100 A320 family aircraft. As per the company, it maintains the largest A320neo fleet in the Americas and provides service to approximately 120 destinations across the United States, the Caribbean, Mexico, and Central America.

For the second quarter, the airline reported GAAP EPS of $0.14, which surpassed analyst estimates by $0.04, but this figure was down from the $0.31 EPS recorded in the same period last year.

The company achieved revenue of $973 million, which was slightly higher year-over-year but fell short of estimates by $57 million. Net income for the quarter was $31 million, which was significantly down from $71 million in the previous year’s second quarter.

It ranks 4th on our list of the worst aviation stocks to buy according to analysts. Out of ratings by 12 analysts, the stock was given 9 Hold ratings and 2 Sell ratings. As of September 16, the average price target of $4.00 is 8.47% less than the present levels.

A key challenge for Frontier Group (NASDAQ:ULCC) has been the rise in operational costs. Total expenses for the quarter increased to $948 million from $888 million a year earlier. Despite efforts to cut costs, including a 6% reduction in cost per available seat mile (CASM), the airline still faces financial pressure. The increase in expenses is largely due to higher fuel and labor costs, alongside a competitive market that impacts pricing.

CEO Barry Biffle noted that while consumer travel demand remains strong during peak periods, the shifts in post-pandemic travel patterns have led the airline to focus its operations more on these peak times. With new revenue initiatives maturing and the airline’s cost advantages, Biffle anticipates that the airline will see margin improvements and become a leading low-cost carrier by 2025.

Despite its previous fears, Frontier Group (NASDAQ:ULCC) has updated its guidance for the third quarter, expecting a pre-tax margin ranging from flat to negative 2%. This is an improvement from the previous forecast of negative 3% to negative 6%. According to the airline, the better-than-expected revenue performance has contributed to this revised outlook.

Additionally, the airline plans to moderate its capacity growth to 4% to 5% year-over-year, down from earlier projections of 4% to 6%. The reduced growth rate is intended to help manage pricing pressures by limiting the number of seats that need to be filled.