Long-Term Perspective Makes Buying American Airlines A No-Brainer

Stocks to buy

Air travel in the U.S. is showing some new signs of weakness thanks to the Covid-19 Delta variant. What does that mean for companies like American Airlines (NASDAQ:AAL)?

An American Airlines (AAL) airplane waiting on the tarmac. Represents airline stocks.

Source: GagliardiPhotography / Shutterstock.com

Well, it depends on what kind of investor you are.

If you’re looking for a quick turnaround profit, airline stocks probably aren’t your cup of tea right now, anyway. Covid-19 makes airlines like AAL stock too risky for short-term plays. The market is reacting week-by-week based on news coming out of Washington and Covid hotspots like Florida and Texas.

But if you’re a long-term investor looking for growth, AAL stock remains a solid play.

Because you know that business travel will eventually come back. You know that vacation travelers will eventually flock back to the airports.

And you know that AAL stock today remains depressed, which means it’s a prime candidate to give you healthy, or even oversized, returns over the next couple of years.

Airline Traffic Falls Again

According to the Transportation Security Administration statistics, the number of daily fliers over the past seven days (August 11-17) fell to 1.86 million from 1.99 million in the week before (August 4-10).

While the numbers are much better than they were in 2020 when Covid-19 pretty much shut everything down, we are still a long way from so-called normalcy that we saw in 2019, when daily travelers fluctuated from 2.1 million to more than 2.7 million per day.

The culprit here, of course, is the Delta variant, the highly transmissible coronavirus strain sweeping across the United States. CBS News reports that in a recent survey, 27% of people responding say they have postponed their travel plans. And 54% say that the Delta variant makes them less interested in traveling.

American Airlines President Robert Isom told analysts in July that the company anticipated an increase in travel, particularly from business customers who have begun returning to the office.

But that may have been premature. An estimated 80% of all new Covid-19 cases right now are from the Delta variant, and cases will likely increase as students begin returning to the classroom this month.

AAL Stock at a Glance

American Airlines stock is down about 2% over the last week, but that doesn’t tell the full story. AAL stock also posted a small loss over the last 30 days as the Delta variant became more widespread.

So far for the year, AAL is up roughly 24%, but still has about 25% left before it regains levels seen before the novel coronavirus hit.

The company reported second-quarter earnings in July, when it posted a profit for the first time since the pandemic began. Earnings were $19 million, or 3 cents per share, compared to a loss of $4.82 per share a year ago.

Excluding certain items, American reported an adjusted loss of $1.69 per share, which was better than the $2.09 per share that analysts were expecting. Revenue came in at $7.48 billion, up 361% from a year ago, and beat analysts’ expectations of $7.32 billion.

The Bottom Line

AAL stock likely won’t see significant gains as long as the Delta variant is pushing coronavirus cases up. Currently, the U.S. is seeing roughly 100,000 new cases per day.

But if you take a longer view, there’s much more reason for optimism. American is still down roughly 25% from levels seen before the Covid-19 pandemic. There’s no reason to believe that the airline won’t return to that level, particularly as Covid-19 cases begin to fall once again and more people become vaccinated.

AAL stock has a ‘A’ grade and a strong buy rating in my Portfolio Grader.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Louis Navellier, who has been called “one of the most important money managers of our time,” has broken the silence in this shocking “tell all” video… exposing one of the most shocking events in our country’s history… and the one move every American needs to make today.

Articles You May Like

Aterian is Just Another Meme Fueled Short Squeeze Play to Avoid
After years of being ‘squeaky clean,’ the Federal Reserve is surrounded by controversy
Alibaba Is a Victim of the Big Trouble in Real China
Top Wall Street analysts believe these stocks are poised for upside
Cassava Sciences Has Value and Is Likely To Proceed to Phase 3