American Airlines Inflection Point 'Coming,' Says Cowen Analyst Amid Upgrade

• Shares of American Airlines Group Inc AAL have declined 20.56 percent over the past one year, to a low of $38.14 on January 28.
• Cowen’s Helane Becker has upgraded the rating on the company from Market Perform to Outperform, while raising the price target from $47 to $48.
• Becker believes that the stock valuation does not adequately reflect the company’s earnings outlook, with demand for American Airlines expected to remain strong in the near term.

Analyst Helane Becker mentioned, “We expect 1Q16 will be the low point for PRASM and expect sequential improvement through the year. We expect the company to continue to aggressively return capital to shareholders.”

Becker does not expect material downside risk for the stock in the near term, if the economic outlook continues to be unchanged.

According to the Cowen report, “American shares have been under pressure since early 2015 as the company's exposure to Latin America and Dallas have resulted in underperforming unit revenue.”

Although the Latin American market is unlikely to improve in the near term, the revenue declines, especially in Venezuela and Brazil, Becker stated that any further decline would have a muted effect on the overall system.

In addition, the Dallas market showed signs of stabilization, with capacity growth in 2015 having been absorbed and the fares having firmed.

Becker believes that the company’s integration achievements have been underappreciated by the market, given that the American Airlines-US Airways merger having been completed with little or no issues.