American Airlines (NASDAQ: AAL) is facing turbulence as its stock takes a sharp dip following a revised price target from Bank of America Securities. On March 12, 2025, the airline’s stock closed at $10.93, marking a 4.62% decline from the previous day. The drop comes after Bank of America lowered its price target for American Airlines from $20 to $16 while maintaining a neutral rating on the stock.
Why Did BofA Cut American Airlines’ Price Target?
Several factors contributed to the downgrade, including:
Revenue Concerns – American Airlines recently projected a 4% drop in first-quarter revenue. Although the decline wasn’t as severe as expected, it raised concerns about the airline’s financial performance.
Earnings Per Share (EPS) Adjustments – Analysts revised their earnings estimates, predicting a $0.70 loss per share for Q1 2025. Full-year earnings estimates were also lowered from $2.60 to $2.30 per share.
Valuation Adjustments – The airline’s valuation multiple was reduced from 5.5 times earnings to a range of 5 to 5.5, reflecting softer revenue growth expectations.
Bigger Problems in the Airline Industry
American Airlines isn’t the only airline facing headwinds. The entire aviation industry is dealing with multiple challenges:
Economic Uncertainty – Rising inflation, geopolitical tensions, and consumer spending shifts have dampened travel demand.
Operational Disruptions – Severe weather, including wildfires in California, has impacted flight schedules and revenue streams.
Industry-Wide Struggles – Other airlines like Delta have also lowered their revenue projections due to similar challenges.
What Does This Mean for Investors?
While Bank of America has cut its price target, other analysts have mixed opinions. Barclays also lowered its target from $18 to $16 but maintained an “Equal Weight” rating, signaling caution.
The airline industry remains highly volatile, influenced by economic conditions, fuel prices, and travel demand. Investors should closely monitor how American Airlines and its competitors navigate these challenges.
Despite the current slump, some analysts believe that airlines with strong strategies and diversified revenue streams could recover in the long run. For now, American Airlines remains in a holding pattern, with investors watching closely for signs of improvement.
