Imagine how you would feel now had you bought American Airlines (NASDAQ:AAL) stock at its 2013 IPO.
Formed after the merger of the bankrupt AMR Corporation and the former U.S. Airways, AAL stock traded at $25 per share when it was first listed. And while the Nasdaq Composite enjoyed a strong ride since that date, AAL stock hasn’t had the same fortune.
In fact, despite the longest bull market in history, American Airlines stock has now managed to lose 35% since that 2013 IPO. It’s been a spectacular bust for Wall Street and investors alike.
American Airlines Isn’t Ready for Takeoff
And believe it or not, things are getting even worse for AAL stock.
On Monday, American Airlines was among a group of U.S. airlines that lined up in hopes of getting a $50 billion bailout from the federal government, in a mix of direct aid and loan guarantees.
It would be the first bailout of the airline industry since the Sept. 11, 2001, attacks.
Airlines in general are in trouble because of the coronavirus from China that has infected more than 227,000 people and caused more than 9,000 deaths. Widespread restrictions on travel are forcing airlines to cancel flights, ground jets and start rounds of layoffs.
President Donald Trump accounted that the federal government would “back the airlines 100%,” but stopped short of pledging a specific aid package. “We’re going to be looking at it very strongly,” he said.
The bailout would be a quick about-face for American Airlines. CEO Doug Parker had brushed off suggestions of a bailout while speaking at a transportation conference.
“The U.S. airline industry will manage through this and American Airlines will lead the way,” Parker said at the conference. “Our team has built an American Airlines to be able to handle situations like this,” noting that “not one CEO asked for government financial relief” when meeting with Trump earlier in the week.
American Airlines is reportedly also seeking a one-year secured loan to help get it through the coronavirus panic, Bloomberg reported.
The company is also working with its 14,000 pilots to accept voluntary leave packages and early retirement. It has already made plans to cut its international flight capacity by 75% through May 6. American Airlines also expects its domestic flight capacity to fall by as much as 30%.
AAL Stock Has Never Been This Low
American Airlines stock is trading at about $10 per share. That’s a shockingly low price for a company that’s one of the big U.S. airlines.
And believe it or not, the worst may be yet to come. Deutsche Bank analyst Michael Linenberg and Buckingham Research analyst Daniel McKenzie are just two analysts who recently downgraded AAL stock recently.
Falling fuel costs will help American tread water. Parker also points to AAL’s liquidity as a strength, saying the company has $7.3 billion in liquidity, up from $7 billion in January.
The Bottom Line
While the recent market pullback may be a good time for investors to go bargain-hunting, there are far better opportunities out there. Don’t be tempted by a flagging airline that will be more focused on getting a new bailout, securing loans and shedding payroll.
There’s no growth story to be had in the near term for AAL stock. It gets a D rating with my Portfolio Grader.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.