UPDATE: JPMorgan Upgrades Spirit Airlines (SAVE) to Overweight

JPMorgan analyst Jamie Baker upgraded Spirit Airlines (NYSE: SAVE) from Neutral to Overweight with a price target of $30.00 (from $24.00).

The analyst comments "We believe some merger involving Spirit is a high probability outcome. We also believe a merger outcome between Spirit and JetBlue is a growing probability and may overtake the likelihood of a Frontier deal. Most importantly, Spirit shares are trading in line with the proposed Frontier offer, and – owing to the break fee – slightly below what Spirit shareholders would receive if the DOJ were to block the transaction today, holding current share prices constant. In our mind, this largely insulates Spirit shares from any material downside owing to fundamentals, at least in the near term. In the absence of material forecasted downside, we believe Spirit shares should be held at least until the revised June 30 shareholder vote. Ascribing an 80% probability of achieving a $31.50 (JetBlue offer) outcome and 20% to current levels, our Spirit price target rises from $24 to $30 and our rating from Neutral to Overweight, relative to a field of five “Neutrals.” Additionally, we recommend an options trade, specifically a July 15th $20/$25 strike risk reversal (sell a put to buy a call indicatively paying $0.07 [0.32% premium vs $22.29 ref price] for just over one month and into the recently delayed shareholder vote on June 30th)."

For an analyst ratings summary and ratings history on Spirit Airlines click here. For more ratings news on Spirit Airlines click here.

Shares of Spirit Airlines closed at $22.29 yesterday.

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