American Airlines and Spirit Airlines Stocks Soar. Evercore Upgrades Both.

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Shares of American Airlines and Spirit Airlines were rising Monday after shares received upgrades from analysts at Evercore and boosted by cautiously optimistic comments by President Joe Biden’s chief medical adviser about the Omicron version.

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Shares of American Airlines (ticker: AAL) and Spirit Airlines (SAVE) upgraded stocks to in-line and outperform, respectively, after Evercore analyst Duane Pfenigworth’s recent selloff in shares.

Pfennigwerth increased its price target on American from $15 to $17 and on Spirit from $25 to $28.

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Since Thanksgiving, American Airlines has dropped 15%. According to a note from Evercore, spirit shares are down more than 40% since late April.

Meanwhile, comments by Dr. Anthony Fauci, Biden’s chief medical adviser about Omicron’s seriousness, have assuaged investors’ fears about potential travel restrictions, prompting a rally in airline stocks on Monday.

Fauci said in an interview on CNN, “So far, it doesn’t seem like there’s a lot of seriousness to it, state of the Union.

“But we have to be really careful before we make any determination whether it’s less severe or that it doesn’t actually cause any more serious illness than Delta,” he said.

American Airlines, previously rated to underperform at Evercore, rose 10.5% to $18.37, while Spirit Airlines, which was rated by Evercore previously in-line, rose 9.63% to $23.56 on Monday.

Pfennigwerth said he believes American Airlines’ net debt should decrease whenever the company’s cash generation improves. “While American carries a heavy net debt profile versus peers, it also has a low Cap X spending plan over the next three years.”

American Airlines’ tighter matching of supply with demand and a greater sense of margin urgency versus what has been demonstrated previously could further enhance Evercore’s outlook on American Airlines.

Pfennigwerth’s spirit upgrade was based on the belief that the company’s performance and demand would improve.

After challenges this summer, due to airport staff shortages in some geographies, the “company” [Spirit] Until productivity returns to normal, a more conservative outlook for future peak periods will likely occur,” Fennigworth wrote in a note.

Flight demand hit a pandemic record during the Sunday after Thanksgiving as 2.45 million people crossed TSA checkpoints. Cowen analyst Helen Baker, who recently selected United Airlines as her top investment idea for 2022, expects a boom in business travel starting in mid-January.

In the last quarter, nearly all major US airlines beat earnings expectations. Posted by American Airlines lower than expected net loss $641 million, or 99 cents per share in the third quarter.

Spirit Airlines reported a loss of 69 cents per share in the third quarter, an expected loss of $1.02 from Wall Street.

Write to Karishma Vanjani at [email protected]


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