Bomb Threat Shakes American Airlines, Southwest Airlines

A bomb threat hoax is shaking up shares of American Airlines Group Inc (NASDAQ:AAL) and Southwest Airlines Co (NYSE:LUV)

by Alex Eppstein

Published on Jun 2, 2015 at 10:20 AM
Updated on Jul 7, 2020 at 4:48 PM

A number of airline stocks -- including American Airlines Group Inc (NASDAQ:AAL) and Southwest Airlines Co (NYSE:LUV) -- are feeling the heat, following a bomb threat hoax at Philadelphia International Airport. At last check, AAL was down 2.5% at $43.09 and LUV has shed 1.5% at $37.30. While shareholders can't be too happy, short-term put traders are likely welcoming these moves.

Diving right in, AAL's Schaeffer's put/call open interest ratio (SOIR) checks in at 0.48 -- higher than 77% of comparable readings from the past year. In other words, speculators trading options expiring in the next three months have targeted puts over calls at an accelerated clip.

Things are far more bullish among the brokerage bunch. Ten analysts currently rate AAL a "buy" or better, compared to three "holds" and not a single "sell." Plus, the stock's consensus 12-month price target of $65.70 stands at a 52.5% premium to its current perch -- and in uncharted territory.

However, with today's losses, AAL is staring at a year-to-date deficit of nearly 20%. This could pave the way for potential downgrades and/or price-target cuts.

LUV has also struggled in 2015, shedding 12% year-to-date, and currently feeling the weight of its descending 10-day moving average. Not surprisingly, short-term traders have been extremely put-focused, per the stock's SOIR of 1.14 -- in the 97th annual percentile. Echoing this, LUV's 50-day put/call volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 0.50 -- higher than 97% of comparable readings taken in the previous 12 months.

As with American Airlines Group Inc (NASDAQ:AAL), Southwest Airlines Co (NYSE:LUV) could be vulnerable to a round of bearish brokerage attention. Nine analysts consider the shares a "strong buy," versus five "hold" or worse recommendations. What's more, LUV's consensus 12-month price target of $52.50 sits in never-before-seen heights, and is almost 41% above current trading levels.

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