Shares of Allegiant Travel Company (NASDAQ: ALGT) have delivered an impressive run, rising nearly 52% over the past six months. This strong performance has clearly outpaced many peers in the airline sector and has drawn fresh attention from investors looking for value in travel stocks. The recent rally gained further momentum after Allegiant raised its profit outlook for 2025, signaling confidence in its operational strength and financial position.
But after such a sharp rise, an important question remains: should investors stay invested, buy more, or consider booking profits?
What’s Driving Allegiant’s Strong Performance?
The biggest factor behind Allegiant’s rally is its improving profitability outlook. The airline recently increased its 2025 adjusted earnings forecast to above $3.00 per share, up from an earlier estimate of $2.25. Even more striking, earnings from its airline-only operations are now expected to exceed $4.35 per share, compared to the previous guidance of $3.25.
This upgrade reflects better-than-expected performance during the first nine months of 2025. Passenger demand remained strong, costs were managed efficiently, and the airline avoided the operational disruptions that have affected several competitors.
Record Operations Set Allegiant Apart
Allegiant’s recent operational results deserve special mention. During the third quarter, the airline carried 4.6 million passengers, the highest quarterly figure in its history. It also achieved a 99.9% controllable completion rate, meaning almost all scheduled flights operated as planned.
In an industry where delays and cancellations are common, this level of reliability helps build customer trust and keeps costs under control. Strong on-time performance also reduces expenses related to rebooking, crew scheduling, and compensation.
These achievements came at a time when leisure travel demand rebounded strongly, especially for vacation destinations. Allegiant’s business model is well suited for this trend, as it connects smaller cities directly to popular holiday locations, avoiding crowded hubs.
Leisure Travel Demand Continues to Support Growth
Unlike many large airlines that rely heavily on business travel, Allegiant focuses on cost-conscious leisure travelers. This strategy has worked well in the current environment, as more people prioritize vacations but remain careful with spending.
Passenger revenue increased 3.9% year over year during the first nine months of 2025 and accounted for nearly 89% of total revenue. Overall revenue rose 3.5%, showing steady growth despite economic uncertainty.
Looking ahead, Allegiant plans to expand capacity in the fourth quarter of 2025. Scheduled seat capacity is expected to rise 10%, while total system capacity is projected to grow 9.5%. Operating margins for the quarter are forecast between 10% and 12%, which is healthy for a budget airline.
Strong Cash Position Boosts Confidence
Another major positive is Allegiant’s solid balance sheet. The company ended the third quarter of 2025 with $985 million in cash, far exceeding its current debt of around $271 million. This gives the airline flexibility to manage seasonal demand changes, invest in its fleet, and withstand unexpected challenges.
The strong cash position also allows Allegiant to reward shareholders. In 2024, the company paid $21.9 million in dividends and repurchased shares worth $6 million. In the first nine months of 2025, it continued buybacks totaling nearly $13 million, even though it paused dividend payments during that period.
These actions suggest management is confident about the company’s long-term earnings power.
Fleet Modernization Adds Long-Term Value
Allegiant continues to modernize its fleet by retiring older aircraft and adding newer, more fuel-efficient planes. By the end of the third quarter of 2025, the airline operated 121 aircraft, including Airbus A319s, A320s, and Boeing 737-8200 models. It plans to increase this to 123 aircraft by year-end.
Newer planes help reduce fuel costs, lower maintenance expenses, and improve the passenger experience. They also support Allegiant’s efforts to reduce its environmental impact, an increasingly important factor for regulators and investors alike.
Valuation Still Looks Reasonable
Despite the sharp rise in the stock price, Allegiant’s valuation remains lower than the industry average. The stock trades at a price-to-book ratio of around 1.5, compared to an industry average above 3. This suggests that the market is not overly optimistic about the company’s future, leaving room for steady long-term investors.
Value-focused investors may find this appealing, especially given the company’s improving earnings outlook and strong cash position.
Why Wall Street Is Still Cautious
Even with all these positives, analyst sentiment remains mixed. Most analysts currently rate the stock as a hold, with only a few recommending a buy. The average price target is slightly below the current trading price, indicating that much of the good news may already be reflected in the stock.
Concerns include rising labor costs, ongoing aircraft delivery delays from Boeing and Airbus, and broader economic uncertainty. Any slowdown in consumer spending could affect demand for leisure travel, especially among budget-conscious customers.
Allegiant also carries a relatively high debt-to-equity ratio, which is common in the airline industry but still adds risk if conditions worsen.
What Should Investors Do Now?
Allegiant has executed well in 2025. Strong operations, rising earnings guidance, a healthy cash balance, and a clear focus on leisure travel give the company a solid foundation. The stock’s 52% rally is supported by real improvements, not speculation alone.
However, after such a sharp rise, near-term upside may be limited. The stock could experience periods of volatility, especially if fuel prices rise, economic sentiment weakens, or aircraft delivery issues persist.
For existing investors, holding the stock makes sense as long as operational performance remains strong. For new investors, waiting for a pullback may be wiser than chasing the rally.
In short, Allegiant appears to be a well-run airline with long-term potential, but patience and discipline are key at current price levels.
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