American Airlines downgraded, price target cut to $10 By Investing.com

On Tuesday, TD Cowen adjusted its stance on American Airlines (NASDAQ:), downgrading the stock from Buy to Hold and lowering the price target to $10 from the previous $16. The revision comes amid concerns over the airline’s recent aggressive discounting strategies and potential risks to its revenue and earnings in the second half of 2024.

The analyst noted that the discounting could negatively impact the airline’s revenue per available seat mile (RASM) and earnings per share (EPS) estimates for the latter half of the year. Additionally, they highlighted the need for American Airlines to invest substantially to remain competitive with rivals Delta Air Lines (NYSE:) and United Airlines (UAL).

The firm expressed skepticism regarding American Airlines’ ability to generate free cash flow (FCF) in the medium term. They also indicated that progress on improving the company’s balance sheet might encounter delays.

The downgrade reflects a cautious outlook on the airline’s financial performance and strategic positioning in the competitive aviation market. The new price target of $10 suggests a recalibration of expectations for the airline’s stock value in light of the challenges it faces.

In other recent news, American Airlines has entered a provisional agreement to acquire 100 hydrogen-electic engines from ZeroAvia, marking a significant investment in cleaner technology for its fleet. The airline’s move towards eco-friendly engines aligns with the industry’s broader shift towards reducing aviation emissions. In terms of financial developments, the U.S. Treasury Department has gathered $556.7 million from the sale of warrants in 11 major U.S. airlines, with American Airlines receiving $12.6 billion in government aid.

In labor relations, the Association of Professional Flight Attendants (APFA), representing around 28,000 flight attendants at American Airlines, is gearing up for a possible strike following unsatisfactory contract negotiations. American Airlines has proposed an immediate 17% pay raise in response. Meanwhile, Evercore ISI has adjusted its financial outlook for American Airlines, setting a new price target of $178, slightly down from the previous $180.

InvestingPro Insights

In light of TD Cowen’s recent downgrade of American Airlines (NASDAQ:AAL), real-time data and InvestingPro Tips provide additional context for investors considering the stock’s future. According to InvestingPro, American Airlines operates with a significant debt burden, which aligns with the concerns raised about the airline’s financial health. Furthermore, the Relative Strength Index (RSI) indicates that AAL’s stock is currently in oversold territory, which might attract investors looking for potential rebounds.

InvestingPro Data shows a market capitalization of $7.37 billion and an adjusted P/E ratio for the last twelve months as of Q1 2024 of 4.71, suggesting a lower valuation relative to earnings than the industry average. Additionally, the company’s revenue growth for the last twelve months as of Q1 2024 stands at 1.74%, reflecting a modest upward trajectory in its financial performance. However, it’s worth noting that American Airlines’ short-term obligations exceed its liquid assets, which may raise liquidity concerns for investors.

For those looking to delve deeper into American Airlines’ financials and strategic positioning, InvestingPro offers further exclusive tips. There are an additional 6 tips available, including insights on analyst earnings revisions and profitability predictions for the year. To access these valuable insights and enhance your investment strategy, visit https://www.investing.com/pro/AAL and use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.

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