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On Tuesday, Jefferies analyst Sheila Kahyaoglu increased the price target on American Airlines (NASDAQ:AAL) shares to $11.00, up from the previous target of $10.50, while maintaining a "Hold" rating on the stock. The revision followed a series of meetings with the airline’s executives, including CEO Robert Isom and CFO Devon May, during Jefferies’ Dallas Bus Tour. With a market capitalization of $7.38 billion and current trading price of $11.19, InvestingPro analysis suggests the stock is slightly undervalued, despite a challenging 23.57% decline over the past six months.
According to Kahyaoglu, the second quarter demand for American Airlines remains "stable," but the outlook for the second half of the year is still "uncertain." The analyst noted that the company is on track to recapture indirect sales, which are expected to contribute $14 billion in 2023. The recapture is anticipated to improve by 2 percentage points to -5% in the second quarter and is projected to fully recover by the end of the year, as most deals have been signed and will ramp up throughout the year. InvestingPro data shows the company generated $54.19 billion in revenue over the last twelve months, with a healthy EBITDA of $5.32 billion.
The airline is also focusing on enhancing its premium offerings. By the end of the decade, American Airlines plans to increase its lie-flat and Premium Economy seats by 50%. This expansion will include the introduction of new Flagship Suites. The company is prioritizing areas of premium focus, such as its application for upselling and self-service, as well as improving the Net Promoter Score (NPS). Additionally, American Airlines has been investing in its lounge facilities, with the opening of a new lounge in Philadelphia last week. According to InvestingPro, the company maintains strong financial metrics with a P/E ratio of 10.77 and impressive free cash flow yield of 21%. Subscribers can access 8 additional ProTips and a comprehensive Pro Research Report for deeper insights into AAL’s financial health and growth prospects.
The analyst’s commentary points to American Airlines’ strategic efforts to strengthen its position in the market by improving its premium services and recovering sales channels affected by the industry’s recent challenges. The revised price target reflects Jefferies’ recognition of these initiatives and their potential to contribute to the airline’s financial performance.
In other recent news, American Airlines reported its financial performance for the first quarter of 2025, revealing a mixed outcome. The company’s earnings per share (EPS) of -$0.59 surpassed analyst expectations, which had forecasted -$0.62. However, revenue slightly fell short of projections, coming in at $12.6 billion compared to the anticipated $12.68 billion. Despite the revenue miss, American Airlines maintained a strong liquidity position with $10.8 billion available by the end of the quarter.
In analyst updates, Jefferies revised its price target for American Airlines, reducing it to $10.50 from $12.00 while maintaining a Hold rating. The analyst noted the airline’s significant debt reduction but highlighted potential revenue challenges in the short-haul main cabin segment. American Airlines anticipates 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, though the company has withdrawn its full-year outlook due to economic uncertainty.
The airline also reported a GAAP net loss of $473 million in the first quarter, with an adjusted net loss of $386 million. Despite a slight year-over-year revenue decline of 0.2%, there was a 0.7% increase in unit revenue. American Airlines continues to focus on cost management and strategic growth, including strengthening its partnership with Citi and enhancing customer experience initiatives.
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