American Airlines Stock Soars After Earnings

The equity could benefit from a short squeeze

Deputy Editor
Apr 21, 2022 at 9:33 AM
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American Airlines Group Inc (NASDAQ:AAL) threw its hat into the earnings ring this morning, reporting a smaller-than-expected first-quarter loss of $2.32 cents per share. Revenue came in just above Wall Street's estimates, too, with the company noting March was the first month that revenue surpassed 2019 levels since the onset of the Covid-19 pandemic. The airline said it expects a heftier schedule than competitors Delta Airlines (DAL) and United Airlines (UAL), projecting as much as 94% of its 2019 schedule, and forecasted second-quarter sales to stand 8% higher than the same quarter three years earlier.

AAL is now trading up 12.1% at $21.83, and sports a 6.7% gain for April, which is an impressive feat given its historic underperformance for the month. Today's positive price action should help AAL shift back above the 320-day moving average and year-over-year breakeven level.

American Airlines stock looks primed for a short squeeze. While, short interest fell 13.5% in the most recent reporting period, the 92.67 million shares sold short make up a solid 14.4% of the equity's current available float, and it would take over two days to buy back these bearish bets, at AAL's average daily pace of trading. 

The shares could benefit from an unwinding of pessimism in the options pits. The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.83 stands higher than 97% of readings from the past year, suggesting these short-term options traders have rarely been more put-biased. Echoing this, AAL sports a 50-day put/call volume ratio that sits in the 92nd percentile of its annual range at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This means long puts have rarely been more popular.   


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