American Airlines stock picked up another Buy rating Monday as Wall Street continued to warm to the shares after the carrier’s fourth-quarter earnings.
Citi analysts upgraded the stock to Buy from Neutral, noting that the mainline airlines have moved into a position of strength in the postpandemic environment because of their diversified revenue streams and premium offerings.
“Against this backdrop, American’s ongoing deleveraging focus and continued low capex, along with protracted industry capacity constraints, should continue to support the likes of American Airlines,” Citi’s Stephen Trent said in a note Monday. His target price of $20 implies a 32% gain from Friday’s closing price.
He still prefers Delta Air Lines and United Airlines, but his call puts American ahead of Neutral-rated Southwest Airlines.
Sentiment toward the stock on Wall Street is starting to shift, with 43% of those covering the shares rating them Buy. That is the highest since November 2019, according to FactSet data.
American’s shares jumped 10% Thursday after the carrier forecast stronger 2024 results than Wall Street had expected. The airline expects full year earnings of between $2.25 and $3.25, based on current demand trends, higher than the $2.14 estimated by analysts ahead of earnings. Fourth-quarter earnings also beat expectations.
TD Cowen upgraded the shares to Outperform from Market Perform Friday and said American has got “its mojo back.” Analyst Helane Becker said the 2024 guidance “looks very achievable,” and that she was impressed by American’s generation of free cash flow and progress in paying down its debt.
Seaport Research also upgraded the stock to Buy from Neutral Friday. Analyst Daniel McKenzie said there was room for more gains in the stock price because the airline has a “compelling earnings trajectory.” He has a price target of $23.
“Capacity drives pricing and the industry’s supply and demand equilibrium both domestically and internationally has swung hard in American’s favor for as far as we can see,” he said.
After a turbulent start to the year, American’s fourth-quarter earnings appear to have set the shares on a much smoother course. The stock, which was up 10% this year as of Friday’s close, was 1.6% higher in premarket trading Monday.