UBS Upgrades Allegiant Travel to Buy on Sun Country Synergies

UBS upgraded Allegiant Travel Company (NASDAQ:ALGT) to Buy from Neutral with a price target of $107.00, citing expected earnings synergies from its acquisition of Sun Country Airlines. The revision indicates that Wall Street may be underestimating the combined carrier's long-term earnings power following the merger.

"The market is not appropriately pricing in the long-term earnings power of the combined Allegiant-Sun Country entity," said Atul Maheswari, analyst, UBS, in a statement regarding the upgrade.

Earnings Projections Through 2028

UBS estimates point to earnings per share growth as the two airlines integrate operations. According to an Investing.com report, projections point to potential for 80% EPS growth for fiscal year 2027 to approximately $9.00 per share.

Following that initial jump, the bank forecasts an additional 50% growth for fiscal year 2028, bringing projected EPS to $13.36. These figures rely heavily on the realization of cost and revenue synergies between Allegiant and Sun Country Airlines.

Recent Financial Performance

The upgrade arrives following operational metrics for Allegiant Travel Company. The airline reported second-quarter 2026 earnings with a profit of $2.19 per share, exceeding analyst expectations alongside an operating margin of 9.2%.

These financial results followed a labor agreement approved by Allegiant Air pilots. The contract secured an immediate 40% wage increase and $300 million in retention bonuses, setting the stage for a total cumulative wage increase of 54% by January 2027.

What the Upgrade Means for Regional Carriers

Airline consolidations face scrutiny from investors regarding integration costs and labor friction, particularly in the ultra-low-cost carrier sector. By highlighting multi-year EPS acceleration and operational synergies, UBS's new stance suggests that large-scale fleet and network combinations can unlock profitability gains that outweigh short-term wage pressures.