Raymond James upgrades American Airlines to 'outperform'

Investing.com -- Raymond James upgraded American Airlines Group (NASDAQ: AAL) to "Outperform" from "Market Perform" on an improved revenue outlook and a favourable risk-reward dynamic.

The brokerage also raised its price target for the stock to $24.

Despite modest expectations from a new co-branded card deal, American’s December update pointed to a stronger revenue environment. Enhanced engagement with corporate customers, though likely at a price, also supports the outlook.

Competitive domestic capacity and planned cabin reconfigurations should help align supply with price-sensitive demand.

A revised fuel forecast, while still above the forward curve, offers additional earnings tailwinds.

Raymond (NS:RYMD) James said American is well-positioned ahead of U.S. airline earnings, alongside Alaska Airlines, Allegiant, and JetBlue. Delta Air Lines (NYSE: DAL) remains the brokerage's top pick for medium-to-long-term investors, supported by its robust risk-reward profile.

The brokerage noted the U.S. dollar's strength could bolster international demand, benefiting American's stronghold in South America. However, legacy carriers like Delta and United may gain a greater advantage due to their broader international exposure.

Raymond James also sees a decline in regulatory risks under the incoming U.S. administration, which could pave the way for increased M&A activity, particularly among smaller carriers.

The note highlighted shifting cabin configurations among low-cost carriers, with more first-class and extra-legroom seats being introduced, which could reduce main cabin seat growth, creating a more premium-focused domestic offering.

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