ALGT's 52% Rally in 6 Months: Bullish Momentum or Time to Lock in Gains?

Allegiant Travel Company (ALGT) has been turning heads in the market, with its stock price surging 52% over the past half year. This impressive run has outpaced not only its sector peers but also left competitors like Southwest Airlines (LUV) and Ryanair Holdings (RYAAY) in the rearview mirror during the same period. But here’s the million-dollar question: Is this momentum sustainable, or should investors be taking profits now?

The Fuel Behind ALGT’s Ascent

The recovery in air travel post-pandemic is the primary driver here. As people feel more comfortable returning to the skies, Allegiant’s revenue has responded accordingly. For the first nine months of 2025, the company posted a 3.5% year-over-year increase in total revenue, with passenger revenues—accounting for 88.6% of the top line—jumping 3.9%.

Looking ahead to Q4 2025, management is projecting capacity (measured in available seat miles) to climb 10% year-over-year on a scheduled basis, while total system ASM is expected to rise 9.5% compared to the prior year. The company also guided for an adjusted operating margin range of 10-12% in the fourth quarter, which signals operational efficiency.

Fleet expansion is another tailwind. ALGT has been modernizing its aircraft lineup, moving away from older jets and incorporating newer fuel-efficient planes. The airline ended 2024 with 125 aircraft (34 A319, 87 A320, and four 737-8200s). By Q3 2025, the fleet stood at 121 planes (29 A319, 82 A320, and 10 Boeing 737-8200s), with plans to reach 123 aircraft by year-end.

The balance sheet deserves attention too. As of Q3 2025, ALGT held $985.32 million in cash and cash equivalents against debt of just $270.63 million. This healthy liquidity cushion has enabled the company to return capital to shareholders—$21.9 million in dividends and $6 million in buybacks during 2024, followed by $12.95 million in share repurchases during the first nine months of 2025.

Earnings Estimates Point North

Allegiant raised its full-year guidance in tandem with its Q3 earnings release. Adjusted consolidated EPS for 2025 is now expected to exceed $3.00 (up from $2.25 previously), while adjusted airline EPS is anticipated above $4.35 (prior guidance: above $3.25). The current Zacks Consensus Estimate puts full-year 2025 EPS at $2.97, and analyst estimates for both Q4 and full-year 2025 earnings have been revised upward over the past 60 days.

Valuation: A Relative Bargain

From a valuation standpoint, ALGT appears reasonably priced. The stock trades at a forward 12-month price-to-book ratio of 1.53X, substantially below the five-year industry average of 3.10X. This discount suggests the market may not be fully pricing in the company’s recovery trajectory. ALGT carries a Value Score of A, reinforcing this assessment.

The Storm Clouds on the Horizon

Not everything is smooth sailing. Macroeconomic headwinds are real. Tariff-driven uncertainty, coupled with faltering consumer and corporate confidence, poses a threat to domestic air travel demand. Any softening in bookings could weigh on results.

Boeing’s production troubles are another concern. Delays stemming from quality control inspections and FAA regulatory reviews have thrown a wrench into fleet modernization plans across the industry. For ALGT, postponed aircraft deliveries mean deferred capacity gains, higher maintenance costs on temporarily retained older planes, and increased interest expenses tied to pre-delivery deposits. These factors will pressure profitability going forward.

Labor cost inflation is biting hard. ALGT saw labor expenses surge 19.2% in 2024 and continue climbing in 2025 as new union contracts kicked in. Operating expenses rose 6.4% during the first nine months of 2025 despite fuel costs declining 1% year-over-year. Management has signaled that elevated labor cost pressures will persist.

The Verdict: Hold But Don’t Chase

While ALGT’s valuation is appealing and fundamental tailwinds remain in place, the combination of labor headwinds, aircraft delivery delays, and macro uncertainty creates a less-than-ideal entry point for new money. Investors already holding ALGT should maintain their positions and allow the company to work through these challenges. For those on the sidelines, patience is warranted—a better risk-reward opportunity may emerge once some of these headwinds clear. ALGT’s current Zacks Rank of #3 (Hold) aligns with this cautious stance.