American Airlines rises on analyst upgrades after earnings
Shares of American Airlines (NASDAQ:AAL) advanced 1.2% in premarket trading Friday after the US carrier received two upgrades from Seaport and TD Cowen analysts.
The former upgraded AAL from Neutral to Buy, citing “compelling earnings trajectory and thus valuation.” The price target on the stock is $23, implying a 50% upside from the current share price.
The change in outlook comes for several reasons. Notably, analysts mentioned improvements in capacity and market dynamics, with the balance between supply and demand in both the domestic and international markets shifting significantly in favor of American Airlines.
This change is expected to continue and is a major factor driving the stock's positive outlook.
Moreover, the company is making significant strides in its digital transformation, Seaport’s note stated, which includes moving to cloud-based systems and implementing new distribution capabilities (NDC).
This transformation has been “partially quantified” by American Airlines’ management, “but on our outlook, is worth hundreds of millions in pre-tax profits given the revenue and cost opportunities,” analysts wrote.
Also, the valuation of AAL is now more attractive due to an improved forecast for its profitability, they emphasized.
Meanwhile, TD Cowen analysts hiked AAL’s rating to Outperform and raised the price target to $21.
“American has hit a stride in its operations which has knock-on benefits for CASMex performance. Better than expected 2024 guidance looks very achievable,” the team said.
The investment banking firm voiced its optimism about the company's strong potential for generating free cash flow and its successful efforts in reducing debt, with an upcoming investor day in March expected to be a
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