It has underperformed other airlines for too long. Robust premium sales, healthy corporate travel, and improved bookings add up to a bargain. By Teresa Rivas
Long lines, delays, shrinking legroom, and the dreaded three-ounce liquids rule: Perhaps the only thing more frustrating than modern air travel is trying to invest in airline stocks. An industry known for frequent bankruptcies, underwhelming service, and befuddling even Warren Buffett is no easy sell.
Yet even airlines can have their day in the sun, and that time is approaching for American Airlines Group.
"American is very attractively priced -- around 0.2 times price to sales -- is cash-flow positive, and it has good momentum," says Ryan Kelley, chief investment officer and portfolio manager at Hennessy Funds, which counts the stock among the 10 largest holdings in its mid-cap portfolios. "These movements in airline stocks often do go together, so the fact that American has been lagging means there's some catch-up it can do."
American has long been the laggard among the Big Three legacy airlines, a group that includes Delta Air Lines and United Airlines Holdings. Delta is up 221% from the pandemic low of March 2020, while United has soared more than 400%. American is up only 28%, held back by leverage and operational concerns.
Yet American is making improvements, meaning that its catch-up rally could soon start playing out. The average analyst price target of nearly $18 implies the shares will climb more than a third from a recent $13.32. Citi analyst John Godyn says the stock should rise even more, to $21, about 60% higher than where it trades today.
In January, American reported a disappointing fourth quarter, but that was largely due to a large drop in government revenue amid the shutdown -- and the fact that the company didn't provide any updated mid-quarter financial targets accounting for the event. American delivered strong full-year guidance, as it expects earnings per share of $1.70 to $2.70 in 2026, the midpoint of which is easily above the then-average analyst estimate of $1.97, even with the big expense of canceled flights related to winter storm Fern.
After two years of earnings declines, 2026 could be the year EPS expands: Consensus has moved up to $2.09 a share, nearly six times the 36 cents American earned in 2025. On average, analysts are modeling for nearly 30% EPS growth in 2027, to $2.72, as the company makes progress on its debt burden and leans into its premium offerings, which have proved lucrative for its peers.
Both United and American performed poorly during earnings season. Godyn chalks that up to overblown worries that the companies are fighting over market share in Chicago. "Without another shoe to drop, we believe that the negative Chicago narrative has largely peaked for now," he says. "United and American are most likely to bounce in the short term."
American is also benefiting from trends that are supporting other big carriers.
Problems at ultralow-cost carriers like Spirit Airlines are legacy carriers' gain. Travel demand has remained robust, especially among higher-income Americans. Delta said that revenue from its premium offerings surpassed that of its main cabin for the first time in history in the fourth quarter, and American likewise was upbeat in its commentary about growth from well-heeled fliers.
Robust premium sales, healthy corporate travel, and signs of improved bookings are all positives that lead Bernstein analyst David Vernon to believe that "consensus EPS estimates for 2026 could go up double digits."
Likewise, American is making progress on its balance sheet. The company reduced its debt by more than $2 billion last year, and said that it expects to lower total debt below $35 billion in 2026, a year ahead of schedule.
The last earnings call "sounded more like a 'normal' mainline carrier, as well, rather than a carrier that has been relatively apologetic about strategic and execution missteps over the last 18 months," says Morgan Stanley analyst Ravi Shanker.
Then there's the benefit American will see from its new exclusive credit-card agreement with Citigroup, which officially began on Jan. 1. The program is expected to generate an incremental $1.5 billion in annual earnings before interest and taxes by the end of the decade and be immediately beneficial to 2026 EPS.
There are certainly risks to the American thesis. Many longtime airline skeptics might argue that fixing the business is more difficult than it appears. American has trailed its closest competitors for years. Its debt burden is still substantial. An economic downturn could quickly dampen consumers' vacation dreams, and another government shutdown might be a matter of when, not if, in the current polarized political climate. Weather-related issues, which reared their head again this week, will also weigh on the outlook, if only for the short term.
Yet investors don't have to believe that American deserves a permanent part of their portfolio to see the near-term opportunity. If travel demand -- particularly from wealthy and corporate fliers -- remains strong, bookings keep climbing, and the company keeps improving its balance sheet, it's reasonable to think that the stock won't remain so far behind its legacy rivals.
American and its peers may never be "set it and forget it" holdings, but the stock can give investors at least a temporary lift.
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February 27, 2026 21:31 ET (02:31 GMT)
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