JPMorgan Chase suggests that Spirit Airlines may see huge gains once a JetBlue Airways merger becomes more likely. Jamie Baker, analyst at JPMorgan Chase wrote: “Because this is why we believe SAVE’s share price depends upon the possibility that JBLU wins its bid for SAVE” Baker called it a tactical trade idea as he upgraded the stock to overweight. Recently, JetBlue as well as Frontier Airlines both tried to acquire the discount airline. JetBlue announced in February that they would offer $31.50 per share to shareholders to purchase Spirit. Frontier Airlines, a budget airline, had previously made a similar 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,” Baker wrote. We believe this protects Spirit share from material downsides arising out of fundamentals at least for the immediate term. Spirit shares shouldn’t be sold until at least the revision of the shareholder vote on June 30, as there is no material downside. JPMorgan’s target price of $30 for the stock suggests that shares could rally by 35% after Thursday’s close. Stock is currently up by 2% and 6.4% respectively since June’s beginning. Premarket trading saw shares of Spirit rise 3.5%, and JetBlue gain 1.2% — CNBC’s Michael Bloom contributed reporting
