Allegiant Stock Plunges 17.5% YTD: Should You Buy the Dip?

Core Viewpoint - Allegiant Travel Company (ALGT) has experienced a significant decline in share price, underperforming compared to its industry and competitors like Southwest Airlines and Ryanair [1][7]. Group 1: Stock Performance - ALGT shares have dipped 17.5% year-to-date, indicating a poor performance relative to the transportation-airlines industry [7]. - The stock's disappointing performance has led to speculation about whether it is a good time to buy [4]. Group 2: Challenges Facing ALGT - The company is facing headwinds from a challenging macroeconomic environment, including tariff-induced economic uncertainties that may reduce domestic air travel demand [5]. - Production delays at Boeing due to quality control checks and regulatory reviews are impacting ALGT's fleet expansion plans, leading to lower expected profitability and increased maintenance costs [6]. - Rising labor costs are a significant concern, with a projected increase of 19.2% in 2024, overshadowing the decrease in aircraft fuel costs [7][8]. Group 3: Earnings Estimates and Guidance - ALGT has raised its full-year earnings guidance, expecting adjusted consolidated earnings per share (EPS) to exceed $3.00 for 2025, up from a previous estimate of above $2.25 [9]. - The Zacks Consensus Estimate for ALGT's 2025 EPS is currently pegged at $3.04 per share, reflecting positive sentiment around the stock [10]. Group 4: Positive Factors - Improvement in air travel demand post-pandemic has led to a 3.5% year-over-year increase in ALGT's top line during the first nine months of 2025, primarily driven by a 3.9% rise in passenger revenues [11]. - The company is modernizing its fleet to meet increased travel demand, with plans to maintain a fleet size of 123 by the end of 2025 [12]. - ALGT's liquidity position is strong, with cash and cash equivalents of $985.32 million, significantly higher than its current debt level of $270.63 million [13]. Group 5: Shareholder Initiatives - The company has engaged in shareholder-friendly initiatives, including dividends totaling $21.9 million and share repurchases worth $12.95 million in 2025 [14][15]. Group 6: Valuation - ALGT is currently trading at a discount compared to the industry based on its trailing 12-month price-to-book (P/B) ratio, indicating an attractive valuation [16].