TD Cowen Upgrades American Airlines (AAL) to Buy

TD Cowen analyst Thomas Fitzgerald upgraded American Airlines (NASDAQ: AAL) from Hold to Buy with a price target of $25.00 (from $17.00).

The analyst comments "We upgrade our rating for American Airlines Group from a Hold to a Buy with a price target of $25 (8.4x our 2025 EPS estimate). In hindsight, we were too early with our upgrade a year ago and then failed to appreciate the transitory nature of their headwinds when we downgraded the shares in July. We often write about industry leaders and laggards. We believe that American has an enviable franchise of its own and should be viewed among the industry “haves” vs the “have-nots”. The domestic market has significantly improved since mid-year 2024 as Southwest, JetBlue, Spirit, and Frontier all made material cuts and network changes. Pricing has steadily risen against the decline in supply. We see upside to their Latin American franchise, especially in near-Latin markets, as ULCCs have been making major cuts to those markets too (see Figure 20 on p10 of our most recent capacity tracker). American should see outsized gains as pricing improves in the domestic and Latin markets as it is the largest carrier in both regions. We expect long-haul international flying to remain robust in 2025. While we previously felt American was undersized in its long-haul international flying, we failed to appreciate the opportunity management will have as it takes delivery of A321XLRs. These aircraft will be ideal for transatlantic flying out of PHL in the summer and then flying elsewhere in the winter. Other top-line tailwinds include regaining higher yielding corporate traffic and growth in its premium seating. The company will be lapping favorable RASM and yield comps through the bulk of 2025. Its new co-branded credit card deal will buoy margins into the 2030s. We think that investors picked up on the importance of the deal, but do not believe the benefits are baked into sell-side estimates. We believe consensus estimates in general are underestimating the upside American's P&L should see in 2025 and beyond. We think there is further opportunity for investors to benefit from significant torque in positive earnings revisions. This improved performance will enable the company to continue paying down debt and equity owners should see their share of enterprise value rise in tandem."

For an analyst ratings summary and ratings history on American Airlines click here. For more ratings news on American Airlines click here.

Shares of American Airlines closed at $16.97 yesterday.

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