American Airlines (AAL) Stock Tumbles, Credit Suisse Slashes Rating
NEW YORK (TheStreet) -- Shares of American Airlines Group (AAL) - Get Report are falling 4% to $27.77 in early-morning trading on Wednesday after Credit Suisse lowered its rating by two notches to "underperform" from "outperform" in a note released earlier today.
The firm cut its price target to $28 from $47 on shares of the Fort Worth, TX-based airline operator.
Credit Suisse upgraded the stock in January due to optimism on the industry and the company's micro story, but fuel prices have since risen and yields "dont appear to be following anytime soon," the firm wrote.
International headwinds could intensify in "key geographies" in the second half of 2016 and American Airlines doesn't have as much control over domestic pricing as Credit Suisse thought it did.
Efforts to improve unit revenue trends are unlikely to have an impact for another nine to 12 months, which is too long for many investors to wait to see if yields can recouple with higher fuel prices, Credit Suisse said.
"Without a compelling micro story to support the stock on a relative basis, we find few reasons AAL will outperform given higher leverage and the absence of cash flow support," the firm contended.
Separately, TheStreet Ratings team rates the stock as a "hold" with a ratings score of C-.
American Airlines' strengths such as its notable return on equity and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and a generally disappointing performance in the stock itself.
You can view the full analysis from the report here: AAL
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.