American Airlines Stock Gets 3 Upgrades to Buy. Here's Why. -- Barrons.com
Dow Jones Newswires January 06, 2025 12:55:00 PM ET
American Airlines stock was rising Monday as analysts at Jefferies, TD Cowen, and Melius Research upgraded shares of the carrier to Buy from Hold.
Shares of American Airlines climbed 4.8% to $17.79, on track for the highest close since July 19, 2023, according to Dow Jones Market Data. The gains came after the three firms also raised their price targets. The S&P 500 was up 1% at midday.
Jefferies' upgrade was included in the firm's 2025 Airlines Outlook, where analyst Shiela Kahyaoglu increased the price target on the stock to $20 from $12.
Kahyaoglu pointed to lower capital expenditure and a 10-year card deal with Citi, writing that these factors could drive "significant surprise to the upside in 2025 against a rationalizing industry backdrop."
The carrier's focus on medium and small markets that can be serviced by its regional fleet marks a "stark bifurcation from network peer strategies" centered on larger coastal hubs, the analyst wrote. Kahyaoglu anticipates a continued increase in total revenue per available seat mile, or TRASM, in 2025.
TD Cowen analyst Tom Fitzgerald raised the price target to $25 from $17, over eight times the airline's 2025 earnings per share estimate.
"In hindsight, we were too early with our upgrade a year ago," Fitzgerald wrote, adding that the bank "failed to appreciate" the transitory nature of headwinds when downgrading the stock to Hold from Buy in July 2024.
"We view consensus estimates as too low given tailwinds and favorable comps through 2025," Fitzgerald wrote, citing better domestic pricing and improved credit card economics as two examples.
The analyst also cited potential upside to the carrier's Latin American franchise in 2025 as ultralow cost carriers continue to slash capacity in those markets.
Melius Research analyst Conor Cunningham increased the price target to $23 from $18 as part of the firm's Travel & Transports 2025 Outlook.
"Our bull call on American is pretty simple: given our positive view of the U.S. airlines in 2025, we are broadening the stocks we like," Cunningham wrote.
The analyst nodded to American's credit card extension with Citi and efforts to regain corporate travel market share that was lost when the carrier shifted to a new distribution strategy. These levers "should lead to above-industry unit revenue improvement and margin expansion," Cunningham said.
Although the analyst would prefer a more balanced international footprint, American is poised to benefit from continued strength in the Atlantic as well as "an improving Latin American setup," Cunningham wrote.
As American Airlines stock snapped a three-day losing streak on Monday, competitors were also on the rise.
United Airline Holdings and Delta Air Lines saw the biggest gains, rising 5.2% and 2.6%, respectively, while Alaska Air Group and Southwest Airlines were up 1.8% and 1.6%. |
