On Wednesday, American Airlines Group Inc. (NASDAQ:AAL) experienced a shift in stock rating as Jefferies moved the airline from a "Buy" to a "Hold" status. Accompanying this downgrade, the firm also adjusted the price target to $12.00, a significant decrease from the previous $17.00.
The change in rating comes as the airline faces challenges in executing its long-term strategy, highlighted by an 18% cut in Q2 earnings per share (EPS) and the departure of its Chief Commercial Officer on Tuesday.
While American Airlines has demonstrated a capacity for effective cost management, with an estimated increase of 1.5% in 2024, its revenue performance is anticipated to trail behind its competitors through 2024.
Jefferies points to a projected 3% decline in total revenue per available seat mile (TRASM) for American Airlines, compared to a modest increase for rivals Delta Air Lines (NYSE:DAL) and United Airlines.
This disparity is attributed to tougher-than-expected industry capacity within American Airlines' predominantly short-haul network, which comprises 75% of its operations, and a lack of traction with its current strategy.
The airline's stock adjustment reflects the concerns over its ability to keep pace in a competitive market. The lowered price target of $12.00 echoes these challenges and the need for the company to refine its approach in the face of industry headwinds.
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