American Airlines stock rises on analyst upgrades

Investing.com -- American Airlines (NASDAQ: AAL) stock climbed 4.5% on Monday, buoyed by a series of upgrades from Wall Street analysts who cited improved traffic and a lucrative credit card partnership for their optimistic outlook. Analysts from Jefferies, TD Cowen, and Melius Research shifted their stance on the airline to buy from hold, pointing to a recovery in domestic and corporate travel, as well as the benefits of American's exclusive credit card agreement with Citigroup Inc (NYSE:C ).

TD Cowen's Thomas Fitzgerald set a new price target of $25.00, up from $17.00, and stated, "We upgrade our rating for American Airlines Group (NASDAQ:AAL ) from a Hold to a Buy with a price target of $25 (8.4x our 2025 EPS estimate)." Fitzgerald acknowledged previous misjudgments regarding the airline's performance but now recognizes American's strong position in the industry. He highlighted the airline's dominance in domestic and Latin American markets, the potential of new aircraft for international routes, and the expected continued growth in premium seating and corporate travel. Fitzgerald also emphasized the underestimated impact of American's new co-branded credit card deal, which he believes will support margins well into the 2030s.

Jefferies' Sheila Kahyaoglu also upgraded American Airlines to buy, setting a target of $20.00, up from $12.00. She predicts the airline will outperform due to factors such as recapture of distribution revenues and the aforementioned credit card deal, which she expects to contribute significantly to pre-tax growth by 2030.

The upgrades come as American Airlines has seen a substantial improvement in its domestic market, with competitors making cuts and network changes that 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 enhancements.

While the analysts' comments offer a bullish view on American Airlines' prospects, investors will likely continue to monitor the company's performance closely, especially in light of the anticipated benefits from its credit card partnership and the evolving dynamics of the airline industry.

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Source: Investing.com