American Airlines Stock Surges After Bernstein Upgrade, Price Target Hike: Retail Gets Excited

synopsis

Shares of American Airlines Group Inc (AAL) rose over 4% on Tuesday after Bernstein reportedly upgraded the airline’s stock to ‘Outperform’ from ‘Market Perform' while raising its price target to $24 from $14.

The new price target on the stock represents nearly 33% upside from the current levels.

Bernstein analyst David Vernon said positive pricing and revenue trends across the industry are reflected in the company’s fourth-quarter (Q4) earnings guidance, according to a CNBC report.

Last week, American Airlines said in an SEC filing that it now expects Q4 adjusted earnings per share at $0.55 to $0.75 compared to a previous estimate of approximately $0.25 to $0.50. The airline noted that pricing and revenue environment has continued to improve since its prior Q4 guidance issued on Oct. 24, 2024.

AAL now expects Q4 total revenue per available seat mile (TRASM) to be approximately flat to up 1% versus the same period in 2023. This compares with a prior guidance of 1% to 3% decline.

The company presently expects fourth-quarter CASM-ex to be up approximately 5% to 6%, above the midpoint of its prior guidance range, due in part to a higher accrual for profit sharing driven by higher anticipated earnings in the quarter. An earlier guidance predicted an approximately 4% to 6% growth in the metric.

“AAL’s ability to deleverage thanks to improving industry backdrop [and] new exclusive co-branded credit card deal enhances company outlook,” the analyst said.

Meanwhile, American Airlines and Citi recently announced the extension of their more than 37-year co-branded partnership for the next decade, with Citi becoming the exclusive issuer of the AAdvantage co-branded card portfolio in the U.S. in 2026.

“The notable boost of this steady revenue stream helps us look past the corporate [and] agency rev recovery that’s dragging out through [the] end of ’25,” Vernon said, according to the report.

Following the upgrade and price target hike, retail sentiment on Stocktwits inched up further into the ‘bullish’ territory (66/100), accompanied by high message volume.

AAL’s Sentiment Meter and Message Volume as of 10:41 a.m. ET on Dec. 10, 2024 | Source: Stocktwits

Retail investors on Stocktwits took note of the upgrade, with some expecting the stock to take support at the $18 level.

American Airlines shares have risen over 33% since the beginning of the year, significantly outperforming the benchmark U.S. indices.

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