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Jason Redmond / AFP through Getty Images
At least one airline is taking advantage of the short-term mania, planning to use their increased fare to provide more parity.
American Airlines Group
(ticker: AAL) said in a securities filing Friday that it plans to raise $ 1.1 billion in new equity issuance. The carrier’s stock rose this week, gaining more than 15% while the company aimed to post earnings on Thursday.
America is the shortest airline stock, with about 25% of outstanding shares held short. It seems to have gained a lift from short, dynamic pressure where prices rise as do short traders (betting against a stock by borrowing and then selling shares) scrambling to cover their losses by buying shares, fueling price gains.
At recent prices around $ 17.40, American stocks will be trading at the highest levels since June last year. It’s up about 11% this year but it’s down more than 35% over the last 52 weeks.
America has issued 68.5 million shares since October last year, at an average price of $ 12.87. Exporting another 64 million shares at an average price of $ 17 raised $ 1.1 billion, weakening outstanding shares by about 10%.
That America needs to raise that huge capital as a sign that it expects them to erode far back into profit. The carrier fired through $ 30 million per day in the fourth quarter, reaching nearly $ 2.8 billion over the three months. It is unlikely to improve much in the short term. The airline said this week that it expects year-over-year sales to drop 60% to 65% in the first quarter, similar to fourth-quarter revenue.
“Strong Covid-19 issues and tighter travel restrictions continued to limit demand,” the airline said in an employment call. In fact, travel trends may get a little worse in the short term, as countries re-introduce travel bans due to new variants of the coronavirus.
Wall Street expects the company to balance in 2022 and start reporting significant earnings in 2023, expected at $ 1.98 a share.
But now the stock is trading far above analysts ’targets. In fact, the average target on the Street is around $ 12 per share.
Citigroup‘s
Stephen Trent Sell held on to the shares this week with a $ 15 target. Savanthi Syth from Raymond James once again confirmed her underperformance level, although she did not set a target.
UBS analyst Myles Walton Sell held on the shares with a $ 10 target. It lowered its 2021 estimates for revenue and raised its forecasts for operating losses to $ 5.7 billion from $ 4.5 billion am- year.
“Reddit rally found taking over some stocks on the market its short way to AAL and we would estimate that if it returned, the company would find a very valuable window for rebalancing,” he wrote. the note Friday morning.
Jamie Baker of JP Morgan withdrew its price target on Thursday, although he believes the stock is worth less than $ 5 a share, based in part on a 2022 seven-fold multiplier of $ 1.33 per share.
It is usually not a good indicator for a stock when analysts are pulling back on their price targets. Achieving greater equity will help America get through another difficult year, but it will not do any favors to investors who value the stock on traditional measures, such as earnings per share. If the Reddit rally cools, so may the stock.
Write to Daren Fonda at [email protected]