Allegiant Gains 52% in 6 Months: What Should Investors Do Now?

Core Viewpoint - Allegiant Travel Company (ALGT) has shown strong stock performance, outperforming its industry and peers over the past six months, with shares increasing in double digits [1][6]. Group 1: Positive Factors - Improvement in air-travel demand post-pandemic has positively impacted Allegiant's revenue, with a 3.5% year-over-year increase in the first nine months of 2025, driven by a 3.9% rise in passenger revenues [5]. - For Q4 2025, capacity is expected to increase by 10% year-over-year, with total system available seat miles (ASMs) projected to rise by 9.5% [5]. - Allegiant's fleet modernization efforts, including the addition of modern aircraft and retirement of older models, align with its environmentally friendly approach [6]. - The company ended Q3 2025 with cash and cash equivalents of $985.32 million, significantly higher than its current debt of $270.63 million, indicating strong liquidity [7]. - Shareholder-friendly initiatives include $21.9 million in dividends and $6 million in share repurchases in 2024, with an additional $12.95 million in share repurchases during the first nine months of 2025 [8]. - Adjusted consolidated earnings per share (EPS) guidance for 2025 has been raised to above $3.00, up from a prior estimate of above $2.25, reflecting positive earnings sentiment [9][10]. Group 2: Valuation Insights - ALGT is trading at a discount compared to the industry, with a forward 12-month price-to-book (P/B) ratio of 1.53X versus 3.10X for the industry, indicating attractive valuation [11]. Group 3: Negative Factors - Allegiant faces challenges from a tariff-induced macroeconomic backdrop, which may reduce consumer and corporate confidence, potentially impacting domestic air travel demand [14]. - Production delays at Boeing due to quality control checks and regulatory reviews are affecting Allegiant's fleet expansion plans, leading to increased maintenance costs and limiting capacity growth [15]. - Labor costs have risen significantly, with a 19.2% increase in 2024, which has outpaced the overall increase in operating expenses, contributing to cost pressures [16].