JPMorgan Chase believes that Spirit Airlines could see big gains as it merges with JetBlue Airways. 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 the stock a “tactical trading idea”, and upgraded it from neutral to overweight as talks intensify. In recent months, JetBlue and Frontier Airlines have been competing to purchase the discount airline. JetBlue offered $31.50 per share for Spirit to its stockholders in the most recent deal. Frontier Airlines announced that it had reached a merger agreement to buy Spirit. “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. This protects Spirit shares, in our opinion, from any significant downside due to fundamentals in the short term. We believe Spirit shares should remain in the stock market at most until the June 30 shareholders vote. 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. Spirit shares rose 3.5% during premarket trading while JetBlue gained 1.2% — CNBC’s Michael Bloom contributed reporting
