Barclays Cuts Target On Spirit Airlines, Says It's No Longer A Top Pick

• Spirit Airlines Incorporated (NASDAQ: SAVE) shares have dipped 51.36 percent year-to-date, trading close to their 52-week low on November 13.
• Barclays’ David E. Fintzen has maintained an Overweight rating on the company, while lowering the price target from $64 to $54.
• While removing the stock as Barclays’ Top Pick, Fintzen said that the recent sell-off in the stock has been “extreme,” although the company continues to be a leader in the low cost segment.

"We've long viewed SAVE's 'moat' as its cost advantage, and still believe that to be the case… SAVE's model is something akin to route level arbitrage. Each route, and maybe even city opportunity, may not last forever. Yet over time there should be plenty of them out there," analyst David Fintzen stated.

Fintzen expressed surprise at the lack of change in the network through 2015, which could possibly have been partly due to the softness in leisure demand.

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However, Fintzen explained that network modification cannot occur overnight, and that pricing dynamics continue to change faster than anticipated, due to lower fuel costs.

"That adds a level of uncertainty to the SAVE story that we’ve not seen since 2012. It does, however, seem to be taking longer than in the past for SAVE to make adjustments," the Barclays report went on to say.

In addition, Fintzen mentioned that the leisure market was weaker than anticipated, with public DOT data suggesting that during 2Q15, Spirit Airlines' PRASM, excluding Houston, Chicago and Dallas, was "surprisingly weak."

While expressing surprise that "leisure markets look to be the weakest segment in the domestic industry," Fintzen added that the weak demand was possibly "playing a role in SAVE relative RASM, and makes route shifts potentially tougher in the near-term."