BY MARK SEBASTIAN
October 28, 2024
American has had its ups and downs over the last year…the stock gyrates ALOT…take a look at the two year chart:
It’s been almost 20 and been below 10…
Why the earnings are all over place…they have labor issues regularly…and oil prices directly affect the stock.
Over the last 12 months the company is finally in the green after this most recent quarter when they delivered .30 a share in earrings. Even so they have not had a full year of winning quarters since a stretch coming out of covid in 2022-2023.
The revenue the company makes has been pretty stable and mostly growing.
Debt is ever so slowly coming down
However keep this in mind…AAL has a market cap of 8.4 billion…they are carrying 27 billion in debt…
That is what holds the stock down…that is how they can have an EBITA of 5 billion over the last 12 months (prior to Thursday’s announcement) and low 120 million dollars.
On a positive note is the cash…they have almost 14 dollars a share in cash…more than the value of the company…thus they can operate at a loss for a while.
My take…if the economy is not going to crater…which it looks like it is not…and oil prices remain subdued…if Boeing can fix their labor issues (plane deliveries for American) and they can avoid their own labor issues the stock is probably a buy up to its old highs…especially if rates start to drop.
American Airlines (Ticker: AAL) had a triple top just over $26 in 2020 and 2021.
Way before that it was a $56 stock.
It has traded sideways from June 2022 to May 2024 bouncing back and forth between $17.75 and just over $12.
Then it gapped even lower.
It has just completed a rounded bottom and today, October 24th, closed that gap created on May 29, 2024.
Earnings were just announced which created mass confusion as displayed by today’s candle which has a very long upper shadow and a very long lower shadow denoting the extreme high and low of the session.
Where does AAL go from here?
Usually when a gap is filled, the stock will return to the direction from which it came.
In this case we also have the rounding bottom and a possible bull flag.
I am bullish over $13.25 to take it to $15.45.
Support comes in at $12.00.
Maybe their new system that calls out line cutters will bring in new business.
It could be fun just to watch people’s reactions.
AG: AAL Vols priced around Biz+
I don’t know anyone who likes flying but I could be in the minority. For myself I am not a good example because I don’t like leaving the driveway but folks do fly. Since COVID, people fly more which is why I am surprised with oil prices cheaper and more folks flying, AAL is not more expensive.
At one point in 2024 AAL was a $19 stock. Right now it is just over $13. For this one, I looked at longer term, 90 day and 120 IVs and even one year IV since this is a Longshot List stock for me. It does look like there is some earnings swing now for AAL. Now IVs are not at the bottom but somewhere in the middle. However, AAL stock price is only $13.
90 day realized volatility is in purple
I do not mind spending a bit more in volatility on a low price stock since a $1 move is a lot volatility-wise.
There is some longer term call buying which has pushed up IV as well. I note the lighter color 360 day IV in the chart above. Straight long term calls near the money provide good value here. I wont say if this is a Flash10 stock yet, but it is moving up the list.
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