The shares of American Airlines Group Inc. skyrocketed Thursday after the airline reported better-than-expected quarterly results, but Cowen analyst Helane Becker warned investors that prices were “from scratch.”
The stock AAL,
shot up 22.2% in morning trading to trade at the highest prices since June. It was also on track for its third-largest one-day percentage gain, following its 35.8% rise on March 24, 2020 and its 41.1% rise on June 4.
Trading volume rose to 136.5 million shares about half an hour after opening, which is on par with the 30-day daily average of approximately 53.7 million shares.
“We believe the move is due to risk reduction in the market and American remains one of the most consensual short airlines in our coverage (~ 25% short interest as of 1/15/21),” Becker wrote in a note to customers. “
Becker refers to the trading dynamics that seem to have contributed to a short squeeze in stocks with a large number of short interest, or bets that prices will fall, such as GameStop Corp. GME,
and AMC Entertainment Holdings Inc. AMC,
Do not miss it: It’s not just GameStop: here are some of the other heavily shorted stocks that shoot higher.
American previously reported that it achieved a fourth-quarter net loss of $ 2.18 billion, or $ 3.81 per share, from net income of $ 414 million, or 95 cents a share, in the same period a year ago. Excluding one-time items, adjusted loss per share was $ 3.86, exceeding FactSet’s loss consensus of $ 4.11.
Revenue fell 64% to $ 4.03 billion, but surpassed the FactSet consensus of $ 3.88 billion. The occupancy rate decreased from 84.7% to 63.4%, but exceeded expectations of 62.9%.
The daily cash burn rate for the quarter was $ 30 million, compared to nearly $ 100 million in April, and the company said it expects to close the first quarter with $ 15.0 billion in total available liquidity.
“Looking to the year ahead, 2021 will be a year of recovery,” said Chief Executive Doug Parker. “While we don’t know exactly when passenger demand will return, we will be ready as the distribution of vaccines comes to a standstill and travel restrictions are lifted.”
Cowen’s Becker said she did not believe the stock rally was fundamentally driven, as American’s outlook – “successively flat to slightly worse” – is comparable to those of its competitors who have already reported. She reiterated her neutral valuation for the stock. (Read more about JetBlue Airways Corp. JBLU,
and Southwest Airlines Co. LUV,
results, also reported Thursday.)
“It’s hard to say when the market will look at the company’s fundamentals, but we think American could take this opportunity to clear the balance with a share offering,” Becker wrote.
Bernstein analyst David Vernon said that while American’s stock appreciation is “more about market dynamics in a strongly abbreviated name than fundamentals,” he said there is “good news” in the company’s results. He repeated his outperform rating.
“Stable cash burn in a volatile income environment and ample liquidity reduce solvency risk,” Vernon wrote in a research note.
American’s stock is up 84.8% in the last three months, but it’s down 24.8% in the last 12 months. For comparison: the listed fund JETS, Global Jets,
is up 36.0% over the past three months and down 26.8% over the past year. The S&P 500 index SPX,
has increased by 16.0% in the past year.