Frontier (ULCC) Valuation in Focus After Upgrade and Spirit Airlines Shake-Up

Frontier Group Holdings (ULCC) just landed squarely in the spotlight after Deutsche Bank upgraded its stock to Buy, citing the airline’s potential to capitalize on Spirit Airlines’ bankruptcy. With Spirit forced to regroup and Frontier plotting 20 new routes, the narrative is quickly shifting. Investors are wondering if these moves could turbocharge growth or signal deeper competitive shifts in the market. It is not every day a rival’s troubles could open the door to such strategic opportunity.

Backing up this renewed buzz, Frontier’s stock has surged by 12% over the past month and an eye-catching 51% across the past 3 months, clawing back from earlier losses this year. While the past 12 months show solid positive growth, the longer-term trend is still lagging, reflecting years of industry turbulence. Notably, recent headlines include a major executive stock sale and an upcoming presentation at Morgan Stanley’s annual Laguna Conference. Both factors are adding to current investor scrutiny.

So after this rebound, is Frontier finally trading at a bargain, or is the market already betting on its next phase of growth?

Most Popular Narrative: 3.9% Undervalued

The current most widely followed narrative suggests that Frontier Group Holdings is trading below its estimated fair value, flagging the airline as modestly undervalued relative to its potential future performance.

“The company's focus on serving cost-conscious travelers in growing secondary and Sun Belt markets is well aligned with the broader shift toward value-driven consumer preferences and ongoing U.S. population migration. Frontier's demand outlook in these markets supports expectations of higher load factors and consistent revenue growth.”

Wondering what’s driving this undervaluation call? This narrative leans on bold financial assumptions and ambitious profit forecasts. The secrets behind these projections could change how you see the stock’s trajectory. Ready to discover which financial levers are predicted to unlock Frontier’s value, and what the analysts are betting on next?

Result: Fair Value of $5.39 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing market oversupply and a heavy reliance on leisure travel could still limit Frontier’s margin improvements if demand does not rebound swiftly.

Find out about the key risks to this Frontier Group Holdings narrative.

Another View: SWS DCF Model Perspective

While Frontier looks attractively priced compared to other airlines by sales, our DCF model could not provide a full fair value because of limited data. Does this gap reflect characteristics of the business, or does it point to uncertainty in forecasts?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Frontier Group Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Frontier Group Holdings Narrative

If you want to dig deeper or see things differently, you can investigate the latest data and shape your own outlook in just a few minutes. Do it your way.

A great starting point for your Frontier Group Holdings research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

Smart investors know that casting a wider net uncovers fresh opportunities. Don’t risk missing outstanding stocks just outside your current watchlist. See what else is out there right now.

• Grow your potential with companies offering reliable income streams by checking out dividend stocks with yields > 3%.
• Unleash the next tech wave by searching through firms shaping artificial intelligence advancements with AI penny stocks.
• Catch undervalued gems before the broader market notices. Find them fast using undervalued stocks based on cash flows.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com