American Airlines Group Stock Should Retake $30 After Positive Guidance

Legacy aviation company American Airlines Group (NASDAQ:AAL) was hit hard during the Covid-19 pandemic, and AAL stock investors lost a lot of capital – but only if they panicked and sold their shares.

An American Airlines (AAL) airplane waiting on the tarmac. Represents airline stocks.
Source: GagliardiPhotography / Shutterstock.com

On the other hand, if they held on, then the big picture looks much brighter. Vaccines are being rolled out, and the signs point to a recovery in the travel industry.

Don’t get me wrong – for AAL stock holders, a full return to pre-pandemic levels won’t be quick or easy.

But while the investors are patiently waiting and holding, there’s recently updated guidance and a bullish analyst call to keep everyone in good spirits.

A Closer Look at AAL Stock

So, is the $30 level a reasonable objective for the shareholders?

AAL stock was quite close to that level immediately prior to the Covid-19-precipitated price drop of February 2020. Therefore, I’d say that $30 is a reasonable goal to shoot for.

It might be hard to recall this now, but American Airlines shares have actually gone much higher than that. In fact, the stock touched the $55 resistance level in 2006, 2014 and 2018.

And in 2021, AAL stock touched the $25 resistance point in March and then again in June.

Hence, $30 as a long-term goal shouldn’t be considered unrealistic.

Now, in the interest of being fair and balanced, I must report an item of concern.

Specifically, American Airlines has trailing 12-month earnings per share of -$14.73. That’s not what the bulls will want to see with a $20-ish stock.

The point is that American Airlines isn’t exactly where the shareholders want the company to be, fiscally speaking. Still, as we’ll see, there are reasons to be optimistic.

Hard to Dismiss

On July 13, American Airlines provided updated second-quarter fiscal numbers.

And apparently, Citi analyst Stephen Trent liked what he saw.

“[T]he combination of the stronger-than-expected 2Q operational guide and the shares drifting below our target price are hard to dismiss,” Trent opined.

Now, let’s not get ahead of ourselves here. American Airlines isn’t expected to report the company’s actual quarterly results until July 22.

For the time being, though, it’s encouraging to hear what the company’s management has to say.

Reportedly, American Airlines’ management guided for an adjusted per-share loss (excluding special credits) in the range of $1.76 and $1.67.

Not only that, but the management expects to end the second quarter with $21.3 billion in liquidity.

That’s more than $1 billion higher than the previously issued guidance, and the differential can be attributed to improving revenues and share sales.

As Trent sees it, American Airlines’ updated figures suggest “a better quarter than the street had expected.”

Seeing Green Shoots

While we don’t have all of the final quarterly fiscal results yet, American Airlines did make an announcement that ought to get the bulls excited.

Cash generation, reportedly, averaged around $1 million per day during the second quarter for American Airlines.

That’s a first for the airline since the start of the Covid-19 pandemic – a difficult time as American Airlines was burning through roughly $100 million per day.

Perhaps, then, CEO Doug Parker and President Robert Isom were justified in declaring that American Airlines is “clearly moving in the right direction.”

It’s conceivable that the broader airline industry is also moving in the right direction. At least, that’s evidently the stance of MKM Partners analyst Conor Cunningham.

“Domestic leisure traffic has fully recovered, and there are green shoots for business and international,” Conor Cunningham asserted.

We can hope that there will be green shoots in the AAL stock chart, too.

The Bottom Line

American Airlines shares won’t likely reach $30 tomorrow, or next week.

Like an airplane trip, there will be stops and inconveniences along the way.

However, with the travel industry showing signs of life – and American Airlines on the right path – the shareholders can hold out hope for less turbulence and a safe flight.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


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