On Thursday, American Airlines (NASDAQ:AAL) shares, currently trading at $16.01 with a market capitalization of $9.78 billion, received an upgrade from Seaport Global Securities, shifting from a Neutral to a Buy rating. The new price target for the airline's shares has been set at $20.00.
According to InvestingPro data, the stock has shown strong momentum with a 28% gain over the past six months. The adjustment comes after a critical evaluation of the company's future revenue potential based on its first-quarter 2025 schedules and a recent credit card agreement.
The analyst from Seaport Global Securities provided insights into the decision to upgrade the rating, citing that despite 2024 being a challenging year for American Airlines, there is confidence in the company's ability to execute on revenue in 2025.
The expectation is anticipated to contribute to a reevaluation of the airline's shares. InvestingPro analysis reveals that 8 analysts have recently revised their earnings estimates upward for the upcoming period, supporting this optimistic outlook.
The upgrade to a Buy rating is supported by an improved risk/reward scenario for American Airlines. Seaport Global Securities has adjusted its outlook for the airline in 2025, reflecting a more optimistic stance on the company's financial performance.
The analyst's statement emphasized the factors influencing the upgrade: "2024 was a rough year for AAL but based on 1Q25 schedules and today's credit card deal, we're comfortable the airline executes on revenue in 2025 which should drive a rerate in shares; boosting our 2025 outlook and upgrading the stock to Buy (from Neutral) on an improved risk/reward. Implementing a $20 PT."
Investors and market watchers now have a revised price target and rating for American Airlines, suggesting a potential upside for the stock based on the company's strategic moves and expected revenue growth in the coming year.
While trading at a P/E ratio of 35.25, InvestingPro subscribers can access over 10 additional key insights and a comprehensive Pro Research Report, offering deeper analysis of AAL's valuation and growth prospects.
In other recent news, American Airlines has been the focus of several significant developments. The company posted robust third-quarter earnings, with a pretax profit of $271 million and earnings per share of $0.30, surpassing estimates.
The total revenue reached $13.6 billion, marking a 1.2% year-over-year increase. In addition, American Airlines revealed plans to reduce total debt by at least $13 billion by the end of 2024 and increase premium seating by 20% by 2026.
On the analyst front, American Airlines received a Neutral rating from UBS, Goldman Sachs (NYSE:GS), and Barclays (LON:BARC), with Barclays upgrading the stock from Underweight to Equal-weight and raising the price target to $16.00. These ratings reflect modest margin improvements and limited upside potential for the airline's stock.
In other developments, the airline failed to overturn an antitrust ruling blocking its partnership with JetBlue Airways (NASDAQ:JBLU) but extended its Tax Benefit Preservation Plan to 2027, aimed at protecting the company's tax assets and reducing federal income tax liabilities. These are the recent highlights that investors may find noteworthy.
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