American Airlines Flies Into Buy Zone On Upgrades, Improving Backdrop

American Airlines Group Inc. (AAL) has soared into a buy zone, with analysts upgrading the stock and raising price targets following a series of positive developments. The airline's stock has rallied 55% from its August low, driven by a combination of improved market conditions, strategic initiatives, and favorable analyst sentiment.

The domestic market has seen significant improvements since mid-2024, with competitors like Southwest (LUV), JetBlue (JBLU), Spirit (SAVEQ), and Frontier (ULCC) making material cuts and network changes. This reduction in supply, coupled with steady pricing increases, has created a favorable environment for American Airlines to operate in. TD Cowen, an investment firm, upgraded AAL stock to "buy" from "hold" and raised its price target to $25 from $17, citing the potential upside in both the domestic and Latin American markets. The firm expects American, as the largest carrier in these regions, to see outsized gains as pricing improves.



American Airlines' expansion into Latin American markets and long-haul international services has also contributed to its recent stock upgrades. The airline's recent order of 50 Airbus A321XLRs, designed for long-distance travel, is expected to expand its transcontinental route offerings and boost its long-haul international services. This expansion is seen as a positive development by analysts, as it should lead to favorable revenue per available seat mile (RASM) and yield comps throughout 2025.

Favorable revenue per available seat mile (RASM) and yield comps, as well as the new co-branded credit card deal, have further influenced the positive outlook for American Airlines' stock. Analysts anticipate favorable RASM and yield comps throughout 2025, driven by the improvement in the domestic market and the airline's strong position in both the domestic and Latin American markets. The new co-branded credit card deal is expected to buoy margins past 2030, adding to the positive outlook for the airline's stock.

Jefferies, another investment firm, also upgraded AAL stock to "buy" from "hold" and raised its price target to $20 from $12. The firm expects American Airlines to generate earnings of $2.55 per share for 2025, driven by higher total revenue per seat mile and a more supportive industry backdrop. The airline's credit card deal also locks in $1.5 billion of incremental pre-tax growth by fiscal 2030 compared to 2024.

In conclusion, American Airlines' stock has flown into a buy zone, driven by a combination of improved market conditions, strategic initiatives, and favorable analyst sentiment. The airline's expansion into Latin American markets and long-haul international services, coupled with favorable revenue per available seat mile (RASM) and yield comps, as well as the new co-branded credit card deal, have contributed to the positive outlook for the stock. Analysts have upgraded the stock and raised price targets, reflecting their confidence in the airline's prospects. As the market continues to improve and American Airlines executes on its strategic initiatives, investors can expect the airline's stock to maintain its upward trajectory.