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Why Did American Airlines Stock Fall 7% on Friday?
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Why Did American Airlines Stock Fall 7% on Friday?

Story Highlights

American Airlines is in the news after its recent updates on Q2 2022 projections. It will be interesting to know what this $10.5-billion airline now expects.

American Airlines Group Inc. (NASDAQ: AAL) has disappointed investors by making changes in its projections for the second quarter of 2022. The alterations were announced by the airlines at the Bernstein 38th Annual Strategic Decisions Conference held on June 3, 2022.

Shares of American Airlines declined 7.1% to close at $16.22 on Friday. The downward movements also continued in the extended trading session.

Inside the Headline

The company expressed how healthy pricing and surge in demand will benefit its top-line results for the second quarter of 2022. It now expects total revenues to grow within the 11%-12% range versus the second quarter of 2019. This is higher than the 6%-8% range communicated in April this year.

Meanwhile, the company expects second-quarter capacity to be on the low-end of the 92%-94% range (versus the second quarter of 2019) provided in April.

Also, the company anticipates higher-than-previously forecast fuel costs in the second quarter. The total operating cost per available seat mile (CASM) is now forecast to be higher, due to increased selling expenses and lower capacity.

Stock Rating

Overall, American Airlines has a Hold consensus rating on TipRanks based on two Buys, seven Holds, and four Sells. AAL’s average price target is pegged at $19.44, reflecting 19.85% upside potential from the current level. Over the past year, shares of American Airlines have declined 33.1%.

Three days ago, Catherine O’Brien of Goldman Sachs reiterated a Sell rating on AAL while increasing the price target to $13 (19.85% downside risk) from $12.

Website Traffic

Per the TipRanks Website Traffic tool, the footfall on AAL’s website has increased by 25.59% so far in the second quarter of 2022 and 27.35% year-to-date against the same period last year. This also means that the company could report healthy top-line numbers in the second quarter.

Conclusion

Healthy demand for business and leisure purposes, both domestically and internationally, is proving advantageous for American Airlines. However, low capacity and high fuel costs remain headwinds.

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