TD Cowen changed their outlook on Sun Country Airlines Holdings (NASDAQ:SNCY) on Monday, raising their price target from $17.00 to $20.00 and maintaining a Buy rating on the stock. The review comes in response to Sun Country’s announcement of an expanded deal with Amazon. The agreement includes the addition of 8 Amazon-owned B737-800BCFs to its cargo fleet, with an integration expected from the end of the first quarter to the third quarter of 2025.
The new deal is expected to substantially improve the airline’s margins in the cargo sector, as the additional aircraft are expected to contribute positively to earnings upon their introduction. Sun Country will operate a total of 20 aircraft for Amazon following the expanded partnership.
To facilitate the growth of cargo services, Sun Country plans to reduce scheduled operations in 2025. The planned reduction is expected to significantly increase the airline’s revenue per available seat miles (RASM) in the following year.
In other recent news, Sun Country Airlines has been actively expanding its cargo fleet thanks to a deal with Amazon, which extends their partnership through 2030, potentially into 2037. The deal sees Sun Country add up to eight Boeing 737- 800 freighters to its operations starting in early 2025, growing its freighter fleet from 12 to a maximum of 20 freighters. This move is in line with Sun Country’s strategy to leverage shared resources across its scheduled, charter and cargo businesses.
Likewise, Deutsche Bank revised its price target for Sun Country to $18 from $20, while continuing to support the stock with a Buy rating. This is in response to Sun Country’s operating margin for the March quarter, which was a robust 18.2%. However, forecasts for the June quarter suggest a significantly lower operating margin of between 4% and 7%.
Insights from InvestingPro
Amid the positive outlook following Sun Country Airlines Holdings’ (NASDAQ:SNCY) expansion of its deal with Amazon, data from InvestingPro reveal a nuanced financial landscape. The airline boasts a market capitalization of $635.6 million and trades at an attractive P/E ratio of 9.36, slightly adjusted to 9.06 when looking at the trailing twelve months starting from Q1 2024 This low P/E ratio is particularly attractive in relation to near-term earnings growth, with a PEG ratio for the same period of just 0.23, suggesting potential value upside for investors.
Furthermore, Sun Country has seen a significant return over the past month, with a total return of 21.51%, which aligns with recent positive market sentiment. Investors may also find the company’s solid revenue growth of 10.91% over the trailing twelve months as of Q1 2024 indicative of its financial health and trajectory, especially in light of the new deal with Amazon.
For those wishing to delve deeper into Sun Country’s financial data and strategic moves, InvestingPro offers further insights. There are 10 more available suggestions from InvestingPro, which include observations on management’s stock repurchase strategy and analysts’ earnings revisions. For those who wish to take advantage of these insights, remember to use the coupon code PRONEWS24 to get an additional 10% discount on an annual or two-year subscription to Pro and Pro+.
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