American Airlines stock price continued its strong uptrend this week as investors cheered the strong earnings by its peers. The AAL share price soared to a high of $18.65, its highest swing since July 2023. It has soared by about 105% from its lowest level in September last year. So, is AAL a good buy ahead of earnings?
US airlines are doing well
Large American airlines are firing on all cylinders as demand remains high, and Boeing’s problems have helped maintain higher-than-expected prices.
A good example of this is United Airlines, which published strong results on Tuesday. Its total operating revenue rose by 7.8% in the fourth quarter to $14.7 billion, while its pre-tax earnings rose to $1.3 billion.
Delta Airlines, the biggest carrier in the country also reported strong results as its revenue and operating profits hit a record. Its revenue jumped to $15.6 billion, while the operating and pre-tax incomes rose to $1.7 billion and $1.2 billion.
These companies will likely continue doing well because of the rising demand and monetizing options. A good example of this is in how airlines have intensified their focus on profits by investing in premium segments.
United, American, and Delta have also become like banks by focusing on their rewards solutions that have attracted millions of customers. They have also increased their routes to meet demand.
Read more: Is the Delta Air Lines stock a buy near its all-time high?
American Airlines earnings next
American Airlines is also doing well as it works to catch up with other big players in the airline industry. In particular, the company is working to regain the lost market share among corporates, who have mostly moved to Delta.
Its third-quarter revenue was a record $13.6 billion, which was higher than most analysts expected. Excluding the net special items, its net income was $205 million.
The next key catalyst for the American Airlines stock price will be its earnings, scheduled for Thursday. Analysts expect these numbers to show that revenue rose 2.76% in Q4 to $13.4 billion. If these estimates are correct, this will bring the company’s annual revenue to $53.94 billion, a 2.17% increase from 2023.
American Airlines’ forward guidance for its revenue will be $56.4 billion, a 4.60% annual increase, meaning that its growth will accelerate. These forecasts are in line with what IATA predicted recently when it estimated that airlines will thrive this year.
Still, AAL faces numerous challenges ahead. For example, while its margins are improving, they remain much lower than Delta and United. The company also has a higher debt burden than its peers. It ended the last quarter with $11.8 billion in available liquidity and is more than $13 billion toward reducing its debt by $15 billion by the end of this year.
Read more: United Airlines stock boomed in 2024: time to book profits?
American Airlines stock analysis
AAL stock chart by TradingView
The weekly chart shows that the AAL share price bottomed at $9.10 in August last year and then bounced back to a high of $18.6, its highest swing since April 2022.
The stock has moved above the key resistance point at $16, its highest swing on February last year. It also jumped above the upper side of the falling wedge chart pattern that formed since 2021. A falling wedge is one of the most bullish patterns in the market.
American Airlines stock has also soared above the 50-week and 25-week moving averages. Also, the Relative Strength Index (RSI) and the MACD have continued rising. Therefore, the stock will likely continue rising, with the next point to watch being at $26, its highest swing in June 2021, and up by 40% above the current level.
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