NEW YORK (TheStreet) -- Shares of American Airlines (AAL - Get Report) are falling by 4.07% to $29.25 in mid-afternoon trading on Thursday, after BofA/Merrill Lynch downgraded the stock to "underperform" from "neutral."
The firm slashed its price target to $27 from $42 on the stock.
The reduced rating reflects recent terrorist attacks, higher fuel prices and the upcoming U.K. vote on whether to leave the European Union, according to Bloomberg.
Rising capacity paired with sluggish revenue from each seat flown per mile indicates that airlines aren't prepared to combat lower demand that might result from attacks such as the mass shooting in Orlando, FL and a potential "Brexit."
BofA/Merrill Lynch also cited the airline's increasing debt load as a reason for the downgrade, according to Bloomberg. American, the world's largest airline, will represent more than 50% of the U.S. industry's net debt by the end of this year, the firm pointed out.
The firm lowered its average estimates for industry earnings per share by 7% for 2016 and 13% for 2017.
"This group is in the doghouse" TheStreet's Jim Cramer said of the airline sector on "Squawk on the Street" this morning.
"The airlines are being viewed as a value trap," Cramer noted, adding that he doesn't urge investors to take the risk.
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 are countered by 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.