Citi cuts American Airlines price target to $21.50, keeps Buy rating

On Tuesday, Citi analysts revised their financial outlook for American Airlines (NASDAQ:AAL), adjusting the price target to $21.50 from the previous $23.00, while maintaining a Buy rating on the stock. Currently trading at $13.87, the stock has experienced a significant 8.33% decline over the past week. According to InvestingPro analysis, AAL appears undervalued based on its Fair Value estimate. The reassessment comes as a result of updated forecasts that take into account a lower expected revenue per available seat mile (RASM) and reduced fuel costs.

The changes in projections have led to a slight decrease in Citi’s first quarter 2025 earnings per share (EPS) estimate for American Airlines, moving from $-0.25 to $-0.30. The airline, currently valued at $9.12 billion, trades at a P/E ratio of 10.85x and reported $54.21 billion in revenue over the last twelve months. Additionally, the firm’s full-year EPS estimates have been recalibrated, with this year’s figure shifting from $2.61 to $2.43, next year’s from $3.59 to $3.04, and the 2027 estimate from $4.47 to $3.89.

Citi’s analysis incorporates these revised expectations into their valuation model. By applying an 8.8x multiple to the modestly reduced 2025 EPS estimate, the target price for American Airlines’ stock has been adjusted accordingly. The new target reflects the updated assumptions about the airline’s performance metrics, including the anticipated lower RASM and fuel expenses.

Despite the lowered price target, Citi’s Buy rating indicates a continuing positive outlook on American Airlines’ shares. The rating suggests that the firm believes the stock still has potential for growth and that the current price could offer an attractive entry point for investors.

The adjustments to the financial forecasts and price target are part of Citi’s ongoing analysis of the airline industry, which involves monitoring various performance indicators and market conditions to provide investors with current and relevant investment guidance. For deeper insights into American Airlines’ financial health, valuation metrics, and 12 additional exclusive ProTips, explore the comprehensive analysis available on InvestingPro, including the detailed Pro Research Report covering what really matters for informed investment decisions.

In other recent news, American Airlines has been in the spotlight following several developments. Redburn-Atlantic upgraded American Airlines’ stock from Neutral to Buy, with analyst James Goodall raising the price target to $24. The upgrade is based on anticipated financial improvements, including a recent credit card agreement with Citi that could significantly boost profits. Meanwhile, Raymond (NSE:RYMD) James maintained its Outperform rating on American Airlines despite the airline’s involvement in a tragic mid-air collision with a U.S. Army helicopter. The incident, which occurred near Washington Reagan Airport, resulted in 67 casualties and is currently under investigation.

The airline industry is also grappling with rising oil prices due to new tariffs on imports from Canada and Mexico, which could increase operating costs for carriers like American Airlines. These tariffs have led to a cautious market stance, as higher fuel costs could affect profitability. Additionally, Boom Supersonic announced that it has achieved supersonic speed with its XB-1 jet, and American Airlines is among the companies expressing interest in Boom’s future aircraft, Overture. These recent developments highlight the dynamic environment in which American Airlines is operating, with potential impacts on its financial performance and strategic initiatives.

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