Wall Street sees an upside potential of 42%
Out of the total analysts surveyed by Bloomberg, 64.7% of analysts have a “buy” or equivalent rating on American Airlines (AAL). About 35.3% of the analysts have a “hold” rating, and no analysts have a “sell” rating for the stock.
The consensus 12-month target price for the stock is $53.18, which implies a return potential of 42% in the next 12 months. In October, Goldman Sachs (GS) decreased its target price for American Airlines (AAL) to $44 and lowered its rating to “neutral” from “buy.”
As you can see in the above graph, apart from JetBlue Airways (JBLU), most of the large US airline operators predominantly have “buy” recommendations from Wall Street analysts.
AAL trades slightly below its moving averages
Technical analysis is highly effective in exploiting short-term opportunities. A holistic approach makes use of technical and fundamental indicators in order to make profitable trades and succeed at active investing.
AAL’s current stock price of $38.12 is slightly below its 20-day, 50-day, and 100-day simple moving averages of $41, $41, and $42, respectively. In general, when a stock is trading below its moving average, it is likely to experience a downtrend. Generally, longer-term moving averages, or 100-day and 200-day, tend to be better indicators of a financial asset’s price movement.
The RSI (relative strength index) is another useful technical indicator that measures the momentum of a stock’s price. An RSI above 70 is indicative of an overbought condition. An RSI below 30 is considered an oversold condition. When the RSI falls below 50 from above 50, it indicates a likely downtrend in prices.
As you can see in the above graph, American Airlines Group (AAL), Delta Air Lines (DAL), United Continental Holdings (UAL), Alaska Air Group (ALK), Southwest Airlines (LUV), and JetBlue (JBLU) are above the oversold territory.
Investors seeking to gain exposure to US airlines can invest in a pooled investment vehicle such as the iShares Transportation Average ETF (IYT). Airlines constitute 17% of IYT’s portfolio.