Stop Selling American Airlines Stock Because It’s ‘Severely Short’, Says Analyst

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Shares of American Airlines Group Inc. have tumbled significantly over the past week and Scott Group, a longtime bearish analyst at Wolfe Research, said it’s to stop selling.

Scott raised its rating on the Texas-based air carrier to Peer Performance after underperforming for at least the past three years. He raised his stock price target, while his earlier of $14 made him the most bearish out of 22 analysts surveyed by FactSet.

His upgrade comes after stock AAL,
It closed Thursday at $14.12, down 14.9% over the past six sessions, or just a fraction above its previous target. This compared with an 11.6% decline in the US Global exchange-traded fund JETS.
and the S&P 500 Index SPX lost 0.8%,
at the same time.

And despite this recent selloff, short interest, or bearish bets on the stock remain relatively high.

,[American’s stock] The huge shortfall remains with 10% low interest, but it continues to execute and beat estimates, operating cleanly in recent quarters,” Scott wrote in a note to clients.

The company has been profitable for the last three quarters, and has exceeded bottom-line expectations in seven of the last eight quarters.

Short interest, or the number of shares shorted, represents 9.77% of the public float, or shares available for public trading, according to the latest exchange data. This compares to 3.41% for Delta’s stock and 4.39% for the combined shares.

Some on Wall Street see high short interest as a bullish sign, because those who made those bets will buy back the stock if it begins to rally, referred to as short covering. goes. The “meme-stock” craze involved heavily lacking stocks. Read more about how short selling works.

See also  Stocks are rising again. Why this rally could last until spring.

In addition, Scott said that while American Airlines still carries a high debt load, he believes the company will significantly reduce its debt this year, given his expectation that cash flow in 2023 will be $2 billion. will be more than

And one reason for their previous bearish stance was that American’s margins were previously “badly and persistently” at rival Delta Air Lines Inc. lagged behind DAL.
and United Airlines Holdings Inc. “Constantly behind” even from UAL

“But in recent quarters, the margin difference Vs. [Delta] has apparently contracted, while it remains unstable relative to [United]Scott wrote in a note to customers.

American Airlines stock, which slipped 0.1% in Friday’s premarket, has declined 10.2% in the past three months through Thursday, compared with a 2.4% gain by the ETF and a 2.8% gain in the S&P 500.