An improving industry environment could bolster shares of American Airlines , according to Redburn Atlantic. Analyst James Goodall upgraded the carrier to buy from neutral and upped his price target on the name to $24 from $18, which reflects 58.6% upside from Tuesday’s close. “The U.S. airline industry is entering a Goldilocks period,” the analyst said in a note to clients on Wednesday. “Substantial constraints on aircraft supply should result in capacity discipline being forced upon the industry in the medium to long term. Coupled with strong demand, particularly for international and premium, as well as growing high-margin revenue streams, we see a pathway for margin expansion and robust [free cash flow] generation for the US network airlines.” His outlook comes as the stock has fallen nearly 11% over the past month on the back of a disappointing first-quarter earnings forecast . But Goodall is unfazed by the outlook, saying that he doesn’t believe management has “lost its focus on costs.” AAL 1M mountain AAL, 1-month “American still operates with materially lower stage lengths versus peers, so it remains a somewhat underappreciated fact that, on a stage-length-adjusted basis, its [cost per available seat mile excluding fuel and net special items] position is lower than its direct competition,” he said. When it comes to revenue, Goodall expects American to see its “greatest positive result” through this year. On top of lower stage length being supportive of this, he anticipates that Atlantic unit revenues will continue to outperform its peers, given the airline’s strong positioning in London. Moreover, the analyst thinks EBIT margins should expand in 2025 and in the years thereafter, and he sees “solid” free cash flow performance at $2.6 billion for this year. More than half of the analysts on Wall Street covering American have an optimistic view of the stock. Alongside Goodall, 13 other analysts out of 23 in total have a strong buy or buy rating, according to LSEG data. On the other hand, 10 have a hold rating on the name. American also has an average target of around $20, implying 36.5% upside potential in the months ahead. Shares were more than 2% higher in the premarket Wednesday following the upgrade.
