Key points

• Spirit Airlines shares surged 53% on Monday.

• The catalyst was an extension the company obtained to refinance its debt.

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• Even though the stock is affordable, it’s not a good value.

Even with the massive rally, this penny stock is still down 86% year to date.

Spirit Airlines ( NYSE:SAVE ) has been through quite a bit of turmoil this year, but its stock was riding high on Monday.

The low-cost carrier’s share price surged 53% on Monday, after rising as much as 60% on the day. It remains in penny stock territory, trading at $2.25 per share.

It’s been a brutal year for Spirit Airlines stock, as even with today’s gains, its value is down 86% year-to-date.

What caused the boost in the value of shares?

Extension of debt refinancing

It’s been a terrible year for Spirit and its shareholders, starting with news in January that the company’s merger with JetBlue Airways (NASDAQ: JBLU) was rejected by regulators because it would put the low-cost carrier out of business.

The company’s stock has fallen from about $16 a share at the beginning of the year to less than $5 a share. As the year progressed, the company’s shares fell further as it remained burdened by billions of dollars in debt while reporting steady net losses and little cash flow.

Earlier this month, several news outlets reported that Spirit was considering filing for bankruptcy because debt refinancing negotiations with bondholders and creditors had stalled.

But the catalyst for Monday’s rally was the news that Spirit had received a deadline extension from its bondholder, U.S. Bank National Association. So now Spirit has until December 23 to reach an agreement to refinance $1.0 billion of loyalty bonds that mature next year.

“On September 9, 2024, the Company entered into a letter agreement that modified the existing card processing agreement to extend the 2025 Note Payment Extension Date from September 20, 2024 to October 21, 2024.” the company wrote in a recent filing with the SEC. “On October 11, 2024, the company entered into a letter agreement that modifies the existing Card Processing Agreement to extend the extension date of the 2025 Notes from October 21, 2024 to December 23, 2024 and the Early Redemption Date from December 31, 2024 to March 3 2025”

What’s next?

This extension essentially gives Spirit more time to negotiate a deal and pushes back some deadlines a bit, but it doesn’t solve the problems for the struggling airline.

In an SEC filing, Spirit officials said the company borrowed $300 million under its revolving credit facility on Oct. 15, the entire amount available. These loans will mature on September 30, 2026.

However, as a result, Spirit expects to end the year with more than $1.0 billion in liquidity, including unrestricted cash and cash equivalents, short-term investment securities, as well as additional liquidity.

Spirit Airlines stock had a good day, but investors should remain cautious on these penny stocks until an actual debt refinancing agreement is reached – and even then, the company will face some headwinds.

Most analysts have a sell rating and a target price of $2.00 per share. So while it may be dirt affordable, it’s not a good value at the moment.