Shares of American Airlines soared 10.5% on Monday possibly fueled by a string of news related to the development and treatment of a COVID-19 vaccine.
The stock may have gotten a lift following a report that claimed that President Donald Trump may fast-track US approval of the AstraZeneca vaccine before elections. Also boosting the general optimism over treatment potential was the US Food and Drug Administration’s (FDA) approval on Sunday for the use of convalescent plasma for treating COVID-19 patients.
American Airlines (AAL) has been one of the most affected airline companies due to the complete travel halt amid the COVID-19 pandemic. On July 23, the company reported an 86.4% year-over-year plunge in 2Q revenues and recorded a pre-tax loss of $4.3 billion. The air carrier had also warned that it might have to lay off 25,000 staff as the pandemic continues to hurt travel demand. (See AAL stock analysis on TipRanks).
However, the latest developments seem to have raised some early optimism in the market that the airline could get airborne and air travel demand will gradually rebound. Furthermore, investors’ hopes about US airline industry prospects got a boost by Trump’s backing of an additional $25 billion financial aid for the aviation industry earlier this month to save jobs and keep the companies afloat amid the ongoing crisis.
On July 27, Raymond James analyst Savanthi Syth upgraded AAL to Hold from Sell, citing a more balanced risk-reward scenario for the stock. Syth said, “Our view remains that bankruptcy is not in the cards for American in 2020 with Chapter 11 only a potential avenue if the earnings recovery stalls over multiple years.”
Currently, the Street is sidelined on the stock. The Hold analyst consensus is based on 4 Sells, 3 Buys, and 2 Holds. With shares down over 53% year-to-date, the average price target of $15.40 implies upside potential of about 14.6% to current levels.
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