What happened

Shares of Spirit Airlines (NYSE:SAVE) traded down 5.4% on Friday after the discount airline's stock was downgraded by Vertical Research Partners. Airlines are stabilizing, but still have a way to go before they get healthy.

So what

Spirit and other airlines struggled in 2020 due to the COVID-19 pandemic. The stock fell more than 75% in the early days of the pandemic, but has slowly fought its way back in the months that followed. Spirit shares are off 35% over the past 12 months, and with a vaccine rollout beginning, investors are hopeful that better times are ahead.

A Spirit Airlines plane on the tarmac.

Image source: Spirit Airlines.

That might be so, but they need to be careful not to get ahead of themselves. Spirit shares on Friday were downgraded by Vertical Research analyst Darryl Genovesi to hold from buy. But the analyst put a $35 price target on the stock, implying he does see some upside given it trades today at just under $26.

The move comes a day after Susquehanna analyst Christopher Stathoulopoulos raised Spirit's price target from $19 to $22, reiterating a neutral stance. The message from Wall Street is that the carriers have stabilized, but the recovery is likely to be uneven and will take time.

Now what

I agree it's wise to be cautious about the airline sector, given the companies are still losing money and need a lot to go right with vaccine distribution and traveler confidence to see a quick rebound. But as bets go, I think Spirit is one of the better ones in the industry right now.

Spirit has one of the lowest cost structures, below even discount king Southwest Airlines, and a route map set up to cater to the leisure travelers expected to return first. While Southwest is a larger, more stable carrier that also can see a quicker-than-average recovery, its stock has already recovered most of what was lost due to COVID-19 and trades at more than twice the multiple to sales as Spirit.

It won't be quick, and caution is advised, but for those willing to look past all the near-term noise, Spirit remains one of the more intriguing airline stocks as 2021 gets underway.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.