Allegiant Travel (ALGT) made good on the shelf filing we pointed out a few weeks ago [Apr 24: Bookkeeping - Adding to Allegiant Travel]; it has now gone down twice on the same news item -typical market "logic".
- Allegiant Travel Co. is planning to sell 2.3 million common shares in a secondary offering. About 2.25 million shares will be offered by Allegiant's second-largest shareholder, PAR Investment Partners, and the rest by Timothy Flynn, who sits on the company's board. After the sale, PAR will own over 1.9 million Allegiant shares.
Almost the entire sale will be from PAR Investment Partners, and unlike my first take when I thought it was new dilutive shares, essentially this appears to be an unlocking of shares. The float is only 13.5M shares, so this is a pretty large increase from that standpoint. While I don't love seeing a major holder unloaded half their holdings, I don't know PAR Investment Partners' reasoning,and it could just be a very large gain they are locking in (I don't have time to research the investment history right now). We might see one more hit to the stock price if the PAR sale is relatively concentrated and sloppy - that would provide another opportunity to add.
With that said, Allegiant Travel is simply hitting the cover off the ball - the April numbers are in and splendid. Unlike so many other stocks which have had huge runs and are incredibly expensive, even with this move, we still have a unique growth story at just over 11x forward earnings. We're taking a sizeable hit since this is one of our larger positions, but I continue to add on the dips (including a small purchase today). Certainly if the vacuum that is the market falls, this one can drop, but if they are executing like this in such a bad economy, just imagine in the green shoot V shaped recovery how well they will be doing.
- Allegiant Air said on Monday that its April traffic jumped 32.8 percent as its niche of hauling leisure travelers from smaller cities helped it resist the business travel falloff that has hurt other airlines. Allegiant, a unit of Allegiant Travel Co., said it flew 422 million revenue passenger miles, or one paying passenger one mile, across its whole system. That was up from 326.1 million revenue passenger miles in April 2008.
- Capacity grew 25.7 percent to 481.3 million available seat miles, from 382.9 million a year ago.
- Its load factor, or the percentage of seats filled, rose 2.5 percentage points to 87.7 percent. Not counting charter flights, load factor increased to 90.3%.
Now indeed if speculators are successful in running up oil to $60, $70, or $80 this summer - all airlines will get hit. But Allegiant made money last year at $140 oil so it won't have anything to do with Allegiant as much as the program trading, lemming like knee jerk movements that dominate our markets in this era. I would prefer they hedge some pricing on fuel down here at these levels in case Bernanke is successful in pushing us into stagflation, but they don't seem to engage in hedging in their business model.
I am going to push technicals aside on this one because if it starts to drop further from here, we're talking 8-9x estimates as the multiple. So I'll be a dip buyer unlike many other stocks where I just shed the stock once it breaks support - certainly a "double top" has a chance of happening here (bearish).
Las Vegas-based Allegiant Travel Company (NASDAQ: ALGT - News) focuses on flying travelers in small cities to world-class leisure destinations such as Las Vegas, Nev., Los Angeles, Cal., Phoenix, Ariz., Fort Lauderdale, Fla., Orlando, Fla. and Tampa/St. Petersburg, Fla. Through its subsidiary, Allegiant Air, LLC, the Company operates a low-cost, high-efficiency, all-jet passenger airline offering air travel both on a stand-alone basis and bundled with hotel rooms, rental cars and other travel related services.
[Jan 5: Beginning Allegiant Travel] (old portfolio)