The shares of Spirit Airlines Incorporated (NASDAQ:SAVE) are trading 8.29% lower after analysts at both Morgan Stanley and Cowen Warn reveal this morning that they suspect near-term downside risk for the stock. According to these analysis firms, the airliner is caught up in a challenging pricing war amid fierce competition from other airline companies. Spirit Airlines Incorporated (NASDAQ:SAVE) has lowered its second quarter fiscal 2015 operating margin guidance to a range of between 21.0% to 21.5%, along with a fiscal year operating margin guidance of 21.5% to 23.0%. Rajeev Lalwani, an analyst at Morgan Stanley, blamed bad weather conditions as the primary reason behind this downgrade, and believes it is likely to cause a quarterly loss of $20 million. Helane Becker, an analyst for Cowen Warn, mentioned the stiff pricing wars Spirit Airlines Incorporated (NASDAQ:SAVE) is facing in Chicago and Dallas. She further said that the airliner’s move to increase seating capacity in the fourth quarter of fiscal 2015 is an aggressive move. According to the June 2015 traffic release of the company, its load factor was down by 2.3% during the month compared to June 2014, although its revenue passenger miles were up by 25.1% to 1.50 billion during the month.
Smart money appears to be in agreement with the latest analyst sentiment, as the funds tracked by Insider Monkey were bearish on the company during the first quarter. 30 investors held $512.52 million of the company’s shares by the end of the period, compared to the start of it when $547.81 million in shares was held by 35 investors. The shares of Spirit Airlines Incorporated (NASDAQ:SAVE) have declined by 23.73% year-to-date, but were actually up slightly during the first quarter when the smart money was trimming their exposure. Even before the latest news, shares were already down heavily since the start of the second quarter.
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Insiders were bullish on the stock of Spirit Airlines however, with Thomas Canfield, Senior Vice President, General Counsel and Secretary, purchasing 1,200 shares of the company on June 1, 2015. There were a few insider sales during the first half of the year as well, including two sales of 3,000 shares total by Director Stuart Oran. As we consider insider purchases to be a far more telling metric than insider sales, we consider the insider activity to be bullish.
With all of this in mind, let’s take a look at the new hedge fund action surrounding Spirit Airlines Incorporated (NASDAQ:SAVE).
Hedge fund activity in Spirit Airlines Incorporated (NASDAQ:SAVE)
At the end of the first quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long in this stock, a drop of 5 from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes considerably.
According to hedge fund experts at Insider Monkey, Highline Capital Management, managed by Jacob Doft, holds the most valuable position in Spirit Airlines Incorporated (NASDAQ:SAVE). Highline Capital Management has a $69.7 million position in the stock consisting of 900,900 shares, comprising 3.2% of its 13F portfolio. On Highline Capital Management’s heels is Anchor Bolt Capital, led by Robert Polak, holding a $67.1 million position of 867,784 shares; 2.7% of its 13F portfolio is allocated to the stock. Some other hedgies that hold long positions consist of David E. Shaw’s D E Shaw, Ken Griffin’s Citadel Investment Group, and Christopher Medlock James’ Partner Fund Management.
Because Spirit Airlines Incorporated (NASDAQ:SAVE) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedge funds who sold off their full holdings in the first quarter. It’s worth mentioning that Robert Joseph Caruso‘s Select Equity Group dumped the largest position of all the hedgies followed by Insider Monkey, worth close to $21 million in stock, while Howard Shainker and Akiva Katz of Bow Street LLC were right behind this move, as the fund cut about $7 million worth of shares.
Considering the present weakness and seemingly bleak upcoming financial results on July 24, this might not be the best time to purchase Spirit Airlines.
Disclosure: None
