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American Airlines (AAL) Stock Climbs On JPM Upgrade

Less than a week after American Airlines AAL posted third-quarter earnings that led to a major sell-off, shares of the airline popped on Wednesday following an upgrade from JPMorgan Chase JPM.

Last week, American Airlines posted a narrow earnings beat and announced that its profits were undercut by a large amount of tropical storm-related flight cancellations. Hurricanes Harvey, Irma, and Maria forced the airline to cancel 8,000 flights in its third-quarter. This cost the airline millions and helped cause its bottom-line to sink almost 10% year-over-year.

Shares of American Airlines have tanked roughly 11% since it posted its Q3 earnings last week.

Still, despite all of the cancelations, there were some positive signs for American Airlines. For one, the company’s revenues popped 2.7% to hit $10.88 billion. On top of that, total revenue per available seat mile rose as well. What’s more, cargo revenue soared 17%.

Looking ahead, the airline company now expects fourth-quarter TRASM to grow between 2.5% and 4.5% year-over-year, driven in large part by improved demand for business and leisure travel.

“Despite the significant operational challenges posed by three hurricanes, our team delivered solid financial results,” CEO Doug Parker said in a statement.

Now, JPMorgan is trying to pump the breaks on the big American Airlines sell-off. The firm upgraded the stock to “Overweight” and upped its price target from $53 per share to $65 per share. JPMorgan’s new price target would mark over a 38% premium from American Airline’s Tuesday closing price.

"Following what we view as an overdone correction in American Airlines shares after third-quarter earnings season, we view the risk-to-reward in American Airlines as attractive," JPMorgan analyst Jamie Baker wrote in a note to clients.

Shares of American Airlines popped over 2% on Wednesday following the JPMorgan upgrade. However, the world's biggest airline by passenger traffic still sits over 13% below its 52-week high as investors worry that competition from low-cost airlines could continue to drive down profit margins.

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