Spoiler: It’s a horrifying number. Here’s why.
Have you been thinking about Spirit Airlines (SAVE 25.93%) lately? You might be, as its stock has fallen, arguably making its stock price more attractive to investors. You might even dream of how much money you could make, and might wonder how much you’d have today if you’d invested $10,000 in it a decade ago. Let’s tackle these questions.
Image source: Getty Images.
First, let’s look at how the stock has been faring. In October, my colleague Neil Patel asked, “Down 97%, is it time to buy Spirit Airlines stock?” — that should give you a clue. Yikes. Indeed, the stock was recently down 85% from its 52-week high — and that’s after a 100%-plus gain in October. Its 10-year average annual gain — or, more accurately, loss — was recently minus 26%.
So…if you’d invested, say, $10,000 in Spirit Airlines a decade ago, in 2014, what would your stake be worth now? I’m sorry to report that the answer is just $377, as of Nov. 8. Ouch. Here’s a more painful twist: In general, it pays to reinvest your dividends from a dividend-paying stock in additional shares of stock, because those shares can start to grow in value for you and they can generate more dividends to reinvest, and so on. But in Spirit Airlines’ case, after 10 years, you’d have ended up with even less — you’d have just $342, due to those shrinking shares.
Here’s what’s going on with Spirit: It was debt ridden and struggling in part due to the pandemic, and struck a deal to be acquired by JetBlue. That fell through, though, with Spirit possibly looking to file for bankruptcy protection
That should be enough to keep you from investing in the airline. Companies can emerge from bankruptcy and go on to do well, but their initial investors typically don’t. Spirit is talking to Frontier Airlines now, but why gamble on a risky stock when there are plenty of attractive stocks in much better financial health, with better prospects?
Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
