Jefferies cuts American Airlines target to $10.50, holds rating

Published 28/04/2025, 12:54
Jefferies cuts American Airlines target to $10.50, holds rating

On Monday, Jefferies analyst Sheila Kahyaoglu revised the price target for American Airlines (NASDAQ:AAL) stock, reducing it to $10.50 from the previous $12.00 while maintaining a Hold rating on the shares. The stock, currently trading at $9.75, has seen significant pressure with a -28.31% return over the past six months. According to InvestingPro data, 12 analysts have recently revised their earnings expectations downward for the upcoming period, with analyst targets ranging from $8 to $24. Kahyaoglu noted that American Airlines’ shares are trading at levels reminiscent of the pandemic despite a significant reduction in total debt, which now stands over $16 billion lower. With a market capitalization of $6.43 billion and trailing twelve-month EBITDA of $5.32 billion, the company trades at an attractive EV/EBITDA multiple of 6.58x, suggesting potential value for investors according to InvestingPro’s analysis.

The analyst highlighted that while American Airlines is expected to outperform in revenue in 2025 due to the recovery of a $1.5 billion deficit from sales and distribution in 2024, this potential gain is likely to be offset by a decrease in short-haul main cabin revenue, which makes up 75% of the network and is anticipated to be down by a mid-high single-digit percentage during the summer season.

Furthermore, Kahyaoglu’s outlook for the second quarter assumes a 2% sequential increase in the recapture of high-yield corporate fares. However, the total revenue per available seat mile (TRASM) is expected to be down by 3-4 percentage points, aligning with the performance of American Airlines’ premium industry peers.

The new price target of $10.50 is based on a 6 times multiple of the projected 2026 earnings per share (EPS) of $1.75. This adjustment reflects the analyst’s assessment of the airline’s financial prospects and market conditions, particularly in the context of its revenue streams and competitive positioning.

American Airlines, like other carriers in the industry, has been navigating the challenges of fluctuating demand and operational costs post-pandemic. The company’s financial performance and stock price continue to be closely watched by investors and analysts as the airline industry recovers and adapts to the evolving market landscape. With annual revenue of $54.19 billion and a P/E ratio of 9.57, the stock appears undervalued according to InvestingPro’s Fair Value model. Discover more insights and access comprehensive analysis with InvestingPro’s detailed research report, available alongside 1,400+ other top US stocks.

In other recent news, American Airlines reported its financial results for the first quarter of 2025, revealing a mixed performance. The company achieved an earnings per share (EPS) of -$0.59, which surpassed analysts’ expectations of -$0.62. However, its revenue fell slightly short at $12.6 billion, compared to the forecasted $12.68 billion. Despite a slight year-over-year revenue decline of 0.2%, American Airlines maintained a strong liquidity position with $10.8 billion available. The airline also generated $1.7 billion in free cash flow during the quarter. Looking ahead, American Airlines has withdrawn its full-year outlook due to economic uncertainty but remains optimistic about achieving profitability if current demand trends persist. Analyst firms, such as Raymond (NSE:RYMD) James, have noted the company’s focus on premium cabin and long-haul international strength, which may help offset domestic market challenges. Additionally, American Airlines expects a capacity increase of 2-4% year-over-year for the second quarter, with earnings projected between $0.50 and $1.00 per diluted share.

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