Latest Airliner to Suffer Boeing Backlash

Despite 737 MAX 8 drama, calls have been a hot commodity on AAL of late

Managing Editor
Apr 9, 2019 at 10:42 AM
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Airline stocks remain in focus this week, with American Airlines Group Inc (NASDAQ:AAL) the latest of the sector moving lower. Down 3.3% at $32.77, at last check, AAL is suffering after the company slashed its first-quarter revenue outlook, due to cancellations stemming from Boeing's (BA) 737 MAX 8 problems. American Airlines employs 24 of the MAX 8 aircraft, and announced further cancellations through June 5, after scrapping about 1,200 flights in the first quarter.

American Airlines stock has been in a long-term downtrend, last seen 34% lower year-over-year, with recent breakout attempts contained by the 160-day moving average. Acting as a floor of support, however, has been the $29-$30 mark, home to the equity's early January and late-March lows.

Despite the recent Boeing drama, options traders have been upping the bullish ante on AAL. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the stock's 10-day call/put volume ratio at 7.49, ranking in the 92nd annual percentile. This lofty ratio suggests that during the past two weeks, calls have been purchased over puts at a much faster-than-usual clip.

Meanwhile, analysts remain optimistic. American Airlines boasts 10 "buy" or better ratings, compared to five "holds" and not a single "sell." Likewise, the average 12-month price target of $43.67 represents a 34% premium to current levels. Should AAL continue to suffer on the charts, a round of downgrades and/or price-target cuts could ensue. In fact, just last night, Credit Suisse cut its target to $36 from $41.

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