What happened

2019 was a good year for most airline stocks, but no company performed better than Allegiant Travel (NASDAQ:ALGT). Shares of the discount airline and travel company gained 73.7% for the year, according to data provided by S&P Global Market Intelligence, thanks to accelerating profits and progress made on some of the company's more ambitious initiatives.

ALGT Chart

ALGT data by YCharts

So what

Allegiant historically has been a niche carrier, serving primarily second-tier markets, where competition is less robust and costs are lower. But the company's ambitions have been growing in recent years. Allegiant has been swapping out its older-generation MD-80 aircraft for newer, more efficient Airbus jets and expanding its presence in larger markets, where it faces more competition.

The strategy worked throughout 2019. Allegiant beat consensus earnings estimates in all four quarterly announcements during the year. Revenue fell short of expectations during some quarters, in part due to issues related to transitioning to new planes and new schedules, but Allegiant showed good cost discipline that helped it consistently beat Wall Street profit expectations.

The criticism of Allegiant in recent years has focused not on the airline's operations, but rather on its unique efforts to diversify. Allegiant is in the process of developing a 20-acre waterfront resort on the west coast of Florida at a cost of more than $450 million.

An aerial view of the planned Sunseeker resort.

Artist rendering of Allegiant's planned Sunseeker resort in Florida. Image source: Allegiant Travel.

Allegiant management is betting that by expanding into resorts, as well as making separate investments in golf and starting a chain of family-friendly restaurants, the company can capture a higher percentage of total vacation spend. But the high cost and uncertain nature of the plan has spooked some Wall Street analysts who would prefer management focus on expanding the airline.

The stock's gain in 2019 came in part because development of the resort, known as Sunseeker, is progressing as planned without any unforeseen difficulties. Company president John Redmond told investors in October that Allegiant remains optimistic it will be able to monetize the resort once it is completed:

We have approximately 800,000 active Sunseeker emails to date, which incredibly enough, we have more than 5,000 emails from over 30 different states. Of course, that speaks volumes about the breadth of the brand awareness and the power of a leisure carrier to develop a resort brand well before a resort opens. Also worth pointing out for anyone who's been on the website, people have the ability to go beyond just giving us an email and actually register their interest with full knowledge of what room rates are as well as providing us additional detail about how long they intend to stay, what their gender is, what their age is, whether they're retired or not, et cetera. When you look at the number of those folks who have actually registered their interest, we have 148,000 of them who have registered their interest to date.

Now what

Allegiant is forecasting full-year 2020 earnings per share of $17.75 at the midpoint, which would represent 20% growth year over year. While it might be difficult for the stock to perform as well in 2020 as it did in 2019, this is an airline growth story with room to run.

The issue, as always, is that Allegiant management has a lot of different projects to juggle and no hope for a payoff until at least mid-2021, when Sunseeker is expected to open. The strategy could prove to be the right one, but until the doors open, expect some lingering skepticism about what has otherwise been one of the most impressive turnaround stories in the airline business.