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American Airlines: Short Interest after Its 3Q17 Earnings

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Short interest

The latest short interest data on December 29, 2017, showed that American Airlines’ short interest has fallen since its 3Q17 earnings were announced on October 26, 2017. It shows that the bearish sentiment in the stock has fallen. As a result, the stock price could increase. As of December 29, 2017, American Airlines’ short interest as a percentage of outstanding shares stood at 4.0%. Its short interest fell from 5.0% as of October 31, 2017. For the same period, the stock price has risen from $46.82 to $52.03.

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Why did the short interest fall?

American Airlines’ positive news of an expected increase in the total revenue per available seat mile by 5%–6% from the earlier guidance of 2.5%–4.5% and continued share repurchases are expected to add value to the remaining shareholders. The introduction of service to Reykjavik, Iceland, adds one more destination for American Airlines. As a result of these positive developments, American Airlines’ bearish sentiments reduced, which resulted in the reduced short interest.

Short interest ratio for American Airlines and its peers

In terms of the number of shares, American Airlines’ short interest was at ~19.40 million shares. Its average trading volume is ~4.30 million shares, which means a short interest ratio of ~4.50x. It requires five days to cover all of the short positions. Below are the short interest ratios for American Airlines’ peers.

  • Delta Air Lines (DAL) – the short interest was 13.10 million shares. The average number of shares traded is 7.1 million shares. The short interest ratio is ~1.84x, which indicates that it will take two days to cover all of the short positions.
  • Southwest Airlines (LUV) – the short interest is at 9.56 million, while the average number of shares traded is at 4.74 million. It will take two days to cover all of the short positions.
  • JetBlue Airways (JBLU) – the short interest ratio stands at ~3.0x. It will take three days to cover all of the short positions.

Investors can hold American Airlines indirectly by investing in the SPDR S&P Transportation ETF (XTN). XTN has invested 2.70% of its portfolio in American Airlines as of January 17, 2018.

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