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The 'Poorly Understood' Story Of American Airlines; Is There 40% Upside Potential?

The 'Poorly Understood' Story Of American Airlines; Is There 40% Upside Potential?

After posting a slight earnings beat for the second quarter, American Airlines Group Inc (NASDAQ: AAL) has further upside ahead, according to Buckingham Research Group analyst Daniel McKenzie.

McKenzie reiterated a Buy rating on the stock and raised his price target from $68 to $70, a 40 percent upside from its close on July 28 after factoring a 1 percent dividend yield.

The company reported an EPS of $1.92 compared to the Street’s $1.87 estimate and sales in line at $11.1 billion.

$5 Billion Q3 Earnings Not Implausible

The company guided for $5 billion in pre-tax earnings which, according to McKenzie, requires two years of excellent revenue per available seat mile execution.

“The vast majority of investors find [that] implausible,” said McKenzie in a note, adding that he’s “comfortable with the math.”

The analyst believes management’s Q3 RASM guide is light, and could be raised on their investor day at the end of September.


McKenzie also estimates that the roll out of basic economy and opportunity from Brazil’s recovering economy could create $2.5 billion in revenue upside.

Network optimization, premium economy and a redesign of its rewards program are among other initiatives that could drive earnings growth.

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Latest Ratings for AAL

Apr 2021Raymond JamesUpgradesUnderperformMarket Perform
Apr 2021Morgan StanleyInitiates Coverage OnUnderweight
Mar 2021JefferiesUpgradesUnderperformHold

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