Last Update 22 Jan 26

Fair value Increased 4.70%

SNCY: Future Margins Should Steady As Cargo And MSP Yields Mature

Narrative Update

Analysts have nudged their fair value estimate for Sun Country Airlines Holdings to $19.43 from $18.56, citing updated price targets that reflect views on potential margin expansion, the Allegiant acquisition agreement, and a slightly higher assumed future P/E multiple.

Analyst Commentary

Recent research on Sun Country Airlines highlights a mix of optimism around margins and cargo, balanced against deal risk and a reset in ratings after the Allegiant transaction announcement.

Bullish Takeaways

Bullish analysts point to an improved margin story, with some explicitly framing a case for "meaningful" margin expansion into fiscal 2027 as scheduled service is restored and cargo operations under the Amazon agreement mature, which they see as supportive of the updated fair value.
Several research notes reference higher price targets in the US$18 to US$21 range. This aligns with expectations that a more diversified revenue mix, including cargo and scheduled service, could support execution on profitability over time.
One firm highlights cargo running at what it describes as full potential along with improved passenger yields at Minneapolis Saint Paul, suggesting that both sides of the business are contributing to the earnings framework analysts use in their models.
Some bullish analysts describe the broader airline setup into fiscal 2026 as "constructive." They connect this view to brand loyalty and multiple revenue streams, factors they see as supportive for Sun Country’s long term earnings profile.

Bearish Takeaways

Bearish analysts have shifted ratings to Neutral or equivalent after Sun Country’s merger agreement with Allegiant. At an implied transaction value of about US$18.89 per share versus a US$19 price target cited by JPMorgan, they see limited upside relative to the proposed deal terms.
At least one research house moved Sun Country to a peer level rating while at the same time upgrading Allegiant. This suggests that any upside from the combination may be perceived as skewed toward the acquirer rather than Sun Country on a stand alone basis.
Some Neutral ratings are being maintained even with higher price targets. This signals caution around execution on margin expansion and integration of cargo and scheduled service targets, especially as analysts factor in the merger uncertainty.
Citi’s Neutral stance, even with a price target move to US$18, reflects a view that airlines could issue what it calls "conservative" 2026 outlooks. This serves as a reminder that earnings trajectories and guidance across the group remain important watchpoints for Sun Country as well.

What's in the News

Allegiant Travel Company entered a definitive agreement to acquire Sun Country Airlines Holdings in a stock and cash deal valuing Sun Country at about US$1.5b, including roughly US$0.4b of net debt. Sun Country holders are set to receive 0.1557 Allegiant shares plus US$4.10 in cash per share and own about 33% of the combined company after close (Key Developments).
The combined airline group is planned to be headquartered in Las Vegas, with Sun Country maintaining a significant presence in Minneapolis St. Paul. Sun Country CEO Jude Bricker will join the Allegiant board alongside two other Sun Country directors, expanding the board to 11 members (Key Developments).
Sun Country plans to open a new operational base at Cincinnati/Northern Kentucky International Airport in early 2026, positioning CVG as a primary base for cargo aircraft and flight crews. The base is expected to officially open on January 31, 2026 (Key Developments).
Fleet service workers at Sun Country approved a first three year collective bargaining agreement with Teamsters Local 970 by roughly 82%. The terms include higher wages, clearer scheduling rules, and expanded paid time off (Key Developments).
Sun Country reported unaudited third quarter and nine month 2025 operating statistics, including load factors of 84.8% for the quarter and 83.3% for the nine month period. The company also issued new guidance for fourth quarter 2025 revenue of US$270m to US$280m and an operating income margin outlook of 5% to 8% (Key Developments).

Valuation Changes

The fair value estimate has risen slightly from US$18.56 to US$19.43 per share.
The discount rate has edged lower from 9.85% to 9.52%, reflecting a modest change in the required return used in the model.
The revenue growth assumption has been trimmed slightly from 8.14% to 7.88%.
The profit margin assumption has eased from 11.12% to 10.66%, pointing to a more conservative profitability outlook in the model.
The future P/E multiple has increased from 8.06x to 8.79x, indicating a higher earnings multiple applied in the updated valuation work.

Expanding cargo operations and digital initiatives are set to diversify revenue and improve efficiency, reducing reliance on seasonal passenger travel.
Lower competition and strong leisure demand support fare stability and margin growth, with increased fleet utilization enhancing operational leverage.
Heavy reliance on seasonal leisure demand, concentrated markets, fleet transition challenges, rising costs, and structural industry risks threaten revenue consistency, profitability, and long-term growth.

Catalysts

About Sun Country Airlines Holdings

An air carrier company, operates scheduled passenger, air cargo, charter air transportation, and related services in the United States, Latin America, and internationally.What are the underlying business or industry changes driving this perspective?

Rapid expansion and full ramp-up of the Amazon Air cargo partnership is expected to roughly double cargo revenues by 2027, significantly diversifying revenue streams and reducing reliance on seasonal passenger travel; this should drive higher, more stable EBITDA and earnings.
Structural pullbacks by major low-cost competitors and shrinking supply on core Minneapolis routes are reducing competitive pressure, supporting fare stability and potential margin expansion as industry-wide capacity discipline persists; this is likely to positively impact both revenue yields and net margins.
Persistent strength in leisure travel demand and solid close-in bookings-especially in peak periods-continues to drive higher unit revenues and offset lower load factors, supporting resilient passenger revenue growth despite broader macro uncertainty.
Acceleration of digital initiatives, such as loyalty program launches and crew productivity tools (PBS), is expected to drive direct channel bookings, enhance ancillary revenue, and improve operating efficiency, potentially boosting both top-line growth and net margin as these programs scale.
As the company regains passenger fleet utilization and absorbs new aircraft coming off lease, overall capacity and operational leverage are projected to improve through 2026–2027, supporting both revenue growth and net margin expansion as fixed costs are spread across a larger, more productive fleet.

Sun Country Airlines Holdings Earnings and Revenue Growth

Sun Country Airlines Holdings Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Sun Country Airlines Holdings's revenue will grow by 8.5% annually over the next 3 years.
Analysts assume that profit margins will increase from 5.4% today to 13.2% in 3 years time.
Analysts expect earnings to reach $185.6 million (and earnings per share of $2.75) by about September 2028, up from $58.9 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 6.5x on those 2028 earnings, down from 11.5x today. This future PE is lower than the current PE for the US Airlines industry at 10.5x.
Analysts expect the number of shares outstanding to grow by 0.71% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.13%, as per the Simply Wall St company report.

Sun Country Airlines Holdings Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Sun Country's business model remains heavily reliant on leisure travel and peak seasonal demand, leading to pronounced earnings volatility and limited pricing power during off-peak periods, which may constrain long-term revenue and margins if macroeconomic conditions dampen discretionary travel.
The company maintains a high geographic concentration, particularly focused around Minneapolis and select sun destinations, leaving it exposed to localized demand fluctuations and competitive actions, which could negatively impact revenue stability and net margin over time.
Delays in utilization and induction timing for the expanding cargo fleet, as well as ongoing reallocation of fleet between segments, have led to periods of excess costs and underutilized assets-posing ongoing risks of compressed net earnings and elevated unit costs through transitional periods.
Elevated capital expenditure requirements for fleet upgrades, inflationary pressures on aircraft and engine assets, and higher labor costs due to new union contracts and pilot wage increases could collectively suppress free cash flow and depress net income as Sun Country seeks operational efficiency.
Structural industry threats-including potential increases in carbon taxes or fuel costs due to environmental regulation, aggressive fare competition from ultra-low-cost carriers, and persistent labor shortages across aviation-pose long-term risks to profitability, operational resilience, and share price appreciation.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $16.667 for Sun Country Airlines Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $20.0, and the most bearish reporting a price target of just $11.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.4 billion, earnings will come to $185.6 million, and it would be trading on a PE ratio of 6.5x, assuming you use a discount rate of 10.1%.
Given the current share price of $12.67, the analyst price target of $16.67 is 24.0% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

SNCY: Cargo Expansion Will Drive Improved Passenger Yields And Margin Expansion