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Investing.com-- TD Cowen analysts increased their price target for American Airlines Group (NASDAQ:AAL) citing management’s optimism, stronger corporate sales recovery, and progress in reducing debt ahead of schedule.
Analysts hiked PT to $30 from $25, while maintaining a "Buy" rating for the stock.
In a note, TD Cowen pointed to improved corporate travel trends, a critical revenue driver for the airline. Corporate managed revenue grew 8% year-over-year in the fourth quarter, with forward bookings showing sustained strength. Management believes it could recapture lost corporate share earlier than anticipated, boosting performance through 2025.
“Management sounded confident on last week's call, and we can envision a lot of upsides to 2025 guidance if corporate traffic recapture comes in ahead of schedule, momentum in credit card spend, recent execution, and solid domestic pricing,” analysts wrote.
The updated outlook also incorporates new estimates following 2024 earnings and management’s 2025 guidance. Analysts highlighted better-than-expected outcomes in negotiating corporate travel agency agreements and momentum from premium seating upgrades and strategic fleet expansion, including Boeing (NYSE:BA) 787s and Airbus XLRs.
TD Cowen also emphasized benefits from the airline’s recently renegotiated credit card partnership, expected to deliver $1.5 billion in incremental pre-tax profit by 2030. Over the longer term, a compound annual growth rate (CAGR) of 10% in cash remuneration is anticipated, significantly outperforming the prior 7% CAGR observed from 2019 to 2023.
American’s execution on efficiency initiatives and deleveraging is running ahead of schedule, offering further margin expansion opportunities, analysts added.