Raymond James upgraded Allegiant Travel Company (NASDAQ: ALGT) to Strong Buy from Outperform on Wednesday, citing potential margin recovery and operational improvements despite a high debt load and near-term fuel cost pressures.
The brokerage set a price target of $116, down from $138, based on roughly 11 times its 2027 earnings-per-share estimate. The multiple is slightly below the 12 times applied to high-quality airlines, reflecting Allegiant’s elevated debt-to-equity ratio of 1.6. The target equates to an enterprise value to EBITDAR multiple of 6.5 times on the 2027 estimate and 8.8 times on the 2026 estimate, compared with a pre-COVID five-year range of 4 to 7 times for U.S. carriers.
Allegiant’s stock was trading at $81.85, down 4% year-to-date but up 35% over the past 12 months. Raymond James highlighted Allegiant’s flexible capacity model, scale gains from the Sun Country acquisition, and strong leisure demand as key drivers. The firm also noted improved ancillary revenue, disciplined peak-period capacity management, and medium-term earnings accretion and synergy potential.
The upgrade follows Allegiant’s Q2 2026 results, which showed adjusted earnings of $2.19 per share, beating expectations for a loss of $0.31. Revenue totaled $943.5 million, slightly below the $978.38 million forecast, with an operating margin of 9.2%, the highest among U.S. carriers in the period. Analysts project the company will remain profitable in 2026, with an EPS forecast of $5.66.
Raymond James cautioned that risks remain elevated, particularly around fuel costs and the integration of Sun Country. The brokerage also noted the recent approval of a new labor agreement by Allegiant Air pilots, which includes a 40% wage increase and $300 million in retention bonuses, culminating in a total wage increase of 54% by January 2027.
The upgrade reflects a broader view of Allegiant’s ability to leverage operational efficiencies and demand strength to offset its debt burden and margin pressures.
