Virgin America Inc (NASDAQ:VA) surged after several financial research firms initiated bullish recommendations for the stock, which climbed nearly 15% to $41 per share today.
Since its initial public offering (IPO) in November, Virgin American gained more than 36%. The company initially offered its shares for $23 per share.
Analysts’ ratings for Virgin America
Michael Linenberg, an analyst at Deutsche Bank initiated a Buy rating with a $44 price target for Virgin America.
In a note to investors, Linenberg commented that the company is an attractive investment in a low cost carrier because it pursuing a unique strategy. He noted that Virgin America is targeting price-sensitive business travelers and high-end leisure customers who gives emphasis in value to a hip, high-tech, high-touch travel experience.
“Virgin America is able to offer a lower price for its three-class product than its primary competitors (namely the traditional network carriers) due to its lower cost structure,” according to Linenberg.
He noted that Virgin America managed to offer lower-price by flying a single type of aircraft (Airbus A320 family), high asset utilization, and outsourcing all functions that are non-passenger facing services (e.g. baggage delivery, heavy maintenance, reservations, etc.).
Analysts at Barclays and Cowen issued a stock rating equivalent to Buy for Virgin America with a price target of $42 per share. Raymond James analysts initiated a Market perform rating for the stock.
Virgin America’s idea for future success
Last month, Virgin America CEO David Cush stated that Vigin America’s idea for future success is simple—high unit revenues and low unit costs.
“Our model is we do have a premium product, we do generate a revenue premium to most of the industry, but we do it with a low-cost model. So we have a very pure low-cost model. We are single fleet type; we are point-to-point. That was really the original playbook for the low-cost model. So: high revenue, low cost, and I think we’re seeing it on the bottom line now that the network has matured,” said Cush during an interview with Motley Fool.
