JPMorgan said this upgrade reflects a long-term shift in which 'the Big 3' airlines have seized the high ground from the 'discounters.'
Investors should buy American Airlines as the carrier's valuation is too good to pass up, according to JPMorgan. Analyst Jamie Baker upgraded the airline's shares to overweight from neutral. Baker said this reflects a long-term shift in which "the Big 3" airlines — American, Delta and United — have seized the high ground from the "discounters." "American is now 60% of its way to reducing its total debt by $15bn by the end of 2025.
Shares of American gained 2.4% during premarket trading Monday. The stock has rallied 9% year to date. To be sure, the analyst said American is not entirely in the clear. "Indeed, looking at the current 5yr CDS-implied probability of default, it hasn't improved all that much. Now to be fair, the [credit default swap] market is very technical, but the current market implies a 47% probability of default assuming 20% recovery," Baker said.
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