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Investing.com - Citi maintained its buy rating and $18.25 price target on American Airlines (NASDAQ:AAL) stock Thursday. The airline currently trades at a P/E ratio of 10.57x, with InvestingPro analysis showing the stock trading at an attractive valuation relative to its near-term earnings growth potential.
The investment bank cited resilient international long-haul and premium demand as key factors supporting its positive outlook, despite acknowledging softness in domestic main cabin demand across the entire airline sector.
Citi highlighted American Airlines’ operations and balance sheet as "moving in the right direction," noting the airline will benefit from significant co-branded card remuneration starting in 2025.
The firm also pointed to declining leverage as a positive indicator for the airline’s financial health, emphasizing that earnings, leverage, and free cash flow have substantially improved compared to pandemic-period 2020/2021 levels.
Citi expressed puzzlement over American Airlines’ current market capitalization, which remains below pandemic-era levels despite the significant financial improvements the carrier has achieved since that period.
In other recent news, American Airlines reported mixed financial results for Q1 2025, with an earnings per share (EPS) of -$0.59, slightly beating the forecast of -$0.62, while revenue came in at $12.6 billion, just shy of the $12.68 billion expected by analysts. The company ended the quarter with a strong liquidity position, holding $10.8 billion available. Meanwhile, Jefferies analyst Sheila Kahyaoglu adjusted the price target for American Airlines, initially lowering it to $10.50 from $12.00, and later raising it to $11.00, while maintaining a "Hold" rating. This adjustment reflects the airline’s ongoing strategic efforts to enhance its premium offerings and recover indirect sales channels.
American Airlines is focusing on increasing its premium seating and improving customer experience, with plans to introduce new Flagship Suites and expand its lie-flat and Premium Economy seats by 50% by the end of the decade. The airline also recently opened a new lounge in Philadelphia as part of its efforts to upgrade its facilities. Despite these initiatives, the airline is navigating challenges such as fluctuating demand and operational costs in a post-pandemic environment. Analysts expect American Airlines to outperform in revenue by 2025, although there are concerns about a potential decrease in short-haul main cabin revenue, which constitutes a significant portion of the network.
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