SpiceJet, an Indian airline, experienced a significant surge in its share price, climbing by nearly 8% on May 24th. This upturn comes as a relief after six consecutive days of declining share values.
The positive momentum was primarily fueled by recent announcements, including the revival of four grounded aircraft by June 15th and a second salary increase for pilots within seven months.
The stock’s rise was welcomed by investors, with SpiceJet shares trading 7.66% higher at Rs 26.05 apiece on the BSE at the time of reporting.
Reasons behind the Share Price Rise
1. Reintroduction of Grounded Aircraft:
One of the primary factors contributing to the resurgence of SpiceJet shares was the announcement that four out of 25 grounded aircraft would be brought back into service by June 15th.
This decision alleviated concerns among investors, who were previously troubled by the potential initiation of insolvency resolution proceedings by aircraft lessors.
2. Second Salary Hike for Pilots:
SpiceJet’s declaration of a second pay raise for pilots within a span of seven months also played a significant role in boosting investor confidence.
This move reflects the company’s commitment to retaining and incentivizing its pilot workforce, which is crucial for operational efficiency and customer satisfaction.
Brokerage Analysis
According to Top brokerage firm, it has maintained a ‘hold’ rating for SpiceJet shares, setting a target price of Rs 40 apiece.
However, the brokerage expressed concerns regarding certain factors that could impact the company’s financial performance, such as the lack of transparency for investors, the transfer of the cargo business, the replacement of inexpensive Boeing planes, the challenges in raising funds, and the weakened state of the balance sheet.
As a result, analyst adjusted its estimated earnings before interest, taxes, depreciation, amortization, and rent (EBITDAR) for FY23E/24E by 6% and 9%, respectively.
SpiceJet Share Price History
In the year 2023, SpiceJet shares have experienced a decline of over 33% in value. This drop contrasts with the performance of the Nifty headline index, which has seen a modest rise of approximately 1% during the same period.
The declining trend in SpiceJet’s share price has underscored the need for positive developments and announcements to restore investor confidence and stabilize the company’s stock performance.
Conclusion: After enduring a continuous decline in share prices over six consecutive sessions, SpiceJet experienced a substantial rebound with an almost 8% surge. The reintroduction of grounded aircraft and the second salary hike for pilots were key factors that boosted investor sentiment.
However, concerns regarding the company’s transparency, cargo business transfer, aircraft replacement, fundraising challenges, and weak balance sheet have influenced brokerage assessments and led to adjustments in estimated earnings.
The decline in SpiceJet’s share price throughout 2023 has demonstrated the significance of positive developments and announcements in restoring investor confidence in the company’s financial stability.
