One of the country’s “big three” airlines, alongside Delta (DAL) and United (UAL) , American Airlines (AAL) has had a year of ups and downs.
Last summer, the Fort Worth, Texas-based airline cut its earnings forecast after what chief executive Robert Isom called the carrier’s “prior sales and distribution strategy” of targeting economy rather than corporate travelers failed to pan out.
An American Airlines jet is seen flying above an ocean.
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Two major analyst upgrades sent American Airlines stock soaring
But the airline was able to pivot toward wooing back corporate travelers and, at the end of October, reported third-quarter earnings of $13.6 billion. On Jan. 6, investment groups Jefferies and TD Cowen both started out the week by raising the American Airlines stock rating from “hold” to “buy.”
The latter brokerage raised its American Airlines price target from $17 to $25, while analyst Tom Fitzgerald wrote that they “were too early with our upgrade a year ago and then failed to appreciate the transitory nature of their headwinds when we downgraded the shares in July.”
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The investor note further reads that American Airlines shares could rally as much as 45% while, long-term, the airline can generally be viewed as one of the “haves” instead of the “have-nots” that have either filed for are one step away from declaring bankruptcy.
Jefferies analyst Sheila Kahyaoglu also raised its price target from American Airlines from $12 to $20 due to what she predicts to be continued increases in revenue per available seat mile (TRASM) as well as a stronger-than-expected earnings per share (EPS) of $1.79 in a 2024.
For the year ahead, Jefferies predicts EPS of $2.55; that is just over 14% more than the current consensus estimate.
Is American Airlines a good investment right now? Analysts from three major firms weigh in
In response to the two raised price targets, American Airlines shares reacted to the Monday morning opening bell by soaring nearly 5% to $17.76. Since hitting a yearly low of $9.26 in August 2024, stock has been climbing steadily back to highs seen in 2021.
According to Jefferies, the turnaround puts American back into the “big three” of the country’s major airlines that are better positioned than others to withstand the challenges facing the industry.
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A week ago, Raymond James (RJF) analysts Savanthi Syth and Carter Eade also called out American Airlines as having “attractive competitive capacity set up, and anecdotal evidence of improved engagement with contracted corporate customers (albeit, likely at a price).”
The price that the carrier could pay refers to American’s aggressive strategy of bringing back corporate travelers potential to tip the scales if travel trends change as well as put it into increased competition with carriers such as Delta.
With the two new ratings, American is now at a “buy” or higher rating with 10 major brokerages while remaining at a “hold” with 12 others. The lower ratings generally remain over the strategy floundering that was observed over the summer of 2024.
“Ongoing corporate share recapture, lower capacity and capital expenditures and a new [partnership with Citigroup for a corporate credit card] means American could see significant surprise to the upside in 2025 against a rationalizing industry backdrop,”.Jefferies analyst Conor Walters wrote further.
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