Stuffsearth.com — Jefferies upgraded American Airlines (NASDAQ:) to Buy from Hold on Monday, citing a strong outlook for 2025 driven by strategic factors such as higher total revenue per available seat mile (TRASM) and a favorable industry backdrop.
The airline’s shares rose more than 4%just after the open on Monday.
The analysts predict a 14% outperformance in AAL’s earnings per share (EPS) for 2025. The price target was raised to $20 from $12 a share.
Key to the upgrade is Jefferies’ 2025 earnings estimate of $2.55 per share, which is 14% above the consensus estimate of $2.23.
The analysts believe AAL will outperform major competitors due to “Distribution recapture of the $1.5BB from ’24,” which had previously been a drag on earnings.
They expect this strategy to add around 20% to EPS, as each 1-point increase in TRASM equates to $0.50 per share.
American Airlines’ network structure is said to be another strength, with 75% of its flights being short-haul, making it well-positioned for favorable comps in 2025.
The company is expected to benefit from a disciplined capacity approach, with Jefferies projecting a 2.3% increase in TRASM for AAL compared to 1.7% for United Airlines (UAL) and 1.1% for Delta (DAL).
“AAL should outperform Mainline TRASMs this year by ~1pt,” the analysts note, supported by a strong capacity shaping strategy.
The firm believes the long-term potential is also promising. Jefferies noted the $1.5 billion pre-tax growth from AAL’s credit card deal starting in 2026.
The partnership is expected to drive significant revenue growth, ultimately benefiting the company’s deleveraging efforts and leading to a strong free cash flow generation.
With these factors combined, Jefferies sees a solid path for AAL to reach the $20 price target, supported by a 7.5x multiple on 2026 EPS.
Elsewhere on Monday, TD Cowen also raised American Airlines to Buy from Hold, lifting its target for the stock to $25 from $17 per share. The bank said it believes American Airlines has an “enviable franchise of its own and should be viewed among the industry ‘haves’ vs the ‘have-nots.’”
“We see upside to their Latin American franchise, especially in near-Latin markets, as ULCCs have been making major cuts to those markets too,” adds TD Cowen. “We believe consensus estimates in general are underestimating the upside American’s P&L should see in 2025 and beyond. We think there is further opportunity for investors to benefit from significant torque in positive earnings revisions.”
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