American Airlines Flies Into Buy Zone On Upgrades, Improving Backdrop

2 days ago 3

American Airlines stock was poised to surge into a buy zone Monday after receiving multiple upgrades and price target hikes to kick off 2025.

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TD Cowen on Monday upgraded American Airlines (AAL) to buy from hold, calling it one of the industry "haves" rather than "have-nots," according to reports. Analyst Thomas Fitzgerald wrote that in hindsight, Cowen's year-ago upgrade failed to appreciate the transitory nature of headwinds facing the company.

However, the domestic market has significantly improved since midyear 2024. Southwest (LUV), JetBlue (JBLU), Spirit (SAVEQ) and Frontier (ULCC) have all made material cuts and network changes. Meanwhile, pricing has steadily risen against a decline in supply.

TD Cowen sees upside to American Airline's Latin American franchise, as ultra low cost carriers (ULCCs) have been making major cuts to those markets. American should see outsized gains as pricing improves in the domestic and Latin markets. American serves as the largest carrier in both regions, Fitzgerald wrote. The firm expects long-haul international flying to remain robust in 2025.

TD Cowen previously felt that American was undersized in long-haul international services. But the airline in November ordered 50 of the premium long-distance A321XLRs from Airbus to expand its transcontinental route offerings. American expects to receive the first A321XLR deliveries in 2025. It plans to launch new international routes by the summer of 2026.

The airline should also see favorable revenue per available seat mile (RASM) and yield comps throughout 2025. And its new co-branded credit card deal should buoy margins past 2030, TD Cowen added.

The firm also hiked its price target on AAL stock to 25 from 17.

Elsewhere, Jefferies on Monday also upgraded American Airlines stock to buy from hold. Jefferies now forecasts American to generate earnings of $2.55 per share for 2025 — 14% higher than the street consensus — driven by higher total revenue per seat mile and a more supportive industry backdrop. The airline's credit card deal also locks in $1.5 billion of incremental pre-tax growth by fiscal 2030 compared to 2024, the firm added. Jefferies lifted its price target 20 from 12.