Allegiant Travel (ALGT) offered investors a brighter outlook after a "tough" Q3, projecting operating margins of 10% to 12% for Q4, well above Wall Street estimates, as "cost savings program" begin to take effect, Morgan Stanley said in a report Wednesday.

The airline reported Q3 loss of $2.09 per share, falling short of analyst estimates, while revenue of $562 million fell short of expectations, primarily due to a 4.6% decline in revenue per available seat mile, but the company offset the weakness through stronger cost control, with unit costs excluding fuel coming in 8.6% below Morgan Stanley's estimates.

Management pointed to the full benefits of a new $20 million cost savings program as a major contributor to the strong Q4 guidance. Furthermore, the company expects its overall revenue growth to outpace cost growth in 2026, driving margin expansion throughout the year, according to the report.

Analysts at Morgan Stanley said the upbeat guidance suggests the carrier "remains on the rebuild path," after a year of uneven results and distractions tied to its now-sold Sunseeker Resort project.

Morgan Stanley maintained an equal weight rating on Allegiant Travel and raised its price target to $85 from $80.

Shares of the company were up more than 19% in recent Wednesday trading.

Price: 69.00, Change: +10.97, Percent Change: +18.90