Investing.com -- Citi lifts price target on American Airlines Group (NASDAQ:AAL), also added the stock into its ‘focus list,’ on potential for significant share price upside driven by earnings surprises.
The brokerage raised its price target for American to $23 from $19, reflecting expectations of higher revenue per available seat mile (RASM) and benefits from a recent credit card agreement.
“Although Delta and United have led the US airlines in terms of postpandemic earnings recovery and share price performance, the market does not seem to fully appreciate the view that American has all the tools it needs to move in the same direction as the latter duo,” ," Citi said in a note
Brokerage views the card agreement with Citigroup (NYSE:C), a strong tailwind for American. Airlines typically generate additional income and working capital from these deals, where card issuers pay for mileage credits linked to card usage.
Citi noted a positive correlation between American’s other income and pre-tax earnings, suggesting the card deal could bolster the airline's profitability.
Despite a 28% rise in American’s stock this year, it has lagged peers like United, which has gained more than 140% and Delta up 58%, indicating that stronger earnings revisions are not fully priced in.
Shares of American Airlines were up ~1% at $17.8 in premarket trading.