American Airlines Shares Soar on Analyst Upgrades

Investing.com -- American Airlines (NASDAQ: AAL) shares rose by 4.5% on Monday. This increase was supported by a series of upgrades from Wall Street analysts who shared optimistic outlooks citing improved traffic and a profitable credit card partnership. Analysts from Jefferies, TD Cowen, and Melius Research changed their stance on the airline from "Hold" to "Buy," highlighting the recovery in domestic and corporate travel as well as the benefits of American's exclusive credit card agreement with Citigroup Inc.

Thomas Fitzgerald from TD Cowen raised the new price target from $17.00 to $25.00, stating: "We are upgrading our rating on American Airlines Group from Hold to Buy and setting our price target at $25, which is 8.4 times our earnings per share estimate for 2025." Fitzgerald acknowledged previous misjudgments regarding the airline's performance but noted that he now recognizes American's strong position in the industry. He emphasized the airline's dominance in the domestic and Latin American markets, the potential of new aircraft for international routes, and expectations for continued growth in premium seating and corporate travel. Fitzgerald also stressed that the impact of American's new co-branded credit card agreement has been underestimated, believing it will support margins until the late 2030s.

Sheila Kahyaoglu from Jefferies also upgraded American Airlines to "Buy," raising the target price from $12.00 to $20.00. She anticipates that the airline's performance will improve due to factors such as the recovery of distribution revenues and the aforementioned credit card agreement. Kahyaoglu expects this agreement to significantly contribute to pre-tax growth by 2030.

These upgrades come after American Airlines experienced significant improvements in the domestic market. Competitors' cutbacks and network changes have led to increased pricing power. Analysts expect this trend to positively affect American's performance, along with the airline's strategic positioning and fleet improvements.

While analysts’ comments present a positive outlook for American Airlines, investors are likely to continue closely monitoring the company's performance, particularly in light of expected benefits from the credit card partnership and the changing dynamics of the airline industry.