Yesterday's Delta PRASM update was disappointing. No two ways about it. The issues of greater competition from international carriers such as mideast carriers who potentially have a cost advantage , and could increase capacity is a potential negative which cannot be completely dismissed.
Did I sell AAL shares? No.
Well unlike DAL, AAL shares are not currently reflecting the full value of the company. So what is AAL worth at $5 annual earnings with the prospect of potentially increasing earnings in 2015?
How much has to be discounted because of the potential for increasing international capacity etc and other risks to this growth. I don't know, but my view is that it is more than $42, and that is why I was not about to sell my AAL share below that price, at this time.
That being said, I do think that it is reasonable and prudent to accept the possibility , perhaps the likelihood , that the upside in AAL is going to be more limited / and or difficult than we might have hoped. People who write things like "easy $50 or easy $55" etc are out of touch with the reality of the investment community realities surrounding this stock. There is and is not likely anything to be easy about a big upside for the shares. Moving up AAL shares will be like "pulling teeth", having to show by facts on the ground (or in the air) at every point . Can it happen? Yes, but there are reals risks, it is NOT automatic. Will it happen? I am inclined to think we will see new highs at some point, but some caution about extreme upside targets is prudent to realize.
No surprise if ALL takes a breather as it has been ON FIRE for anyone who has owned it over the last 6-12 months. Stocks don't run up forever--they need to pause & consolidate their gains. AAL will very likely be a $50 or better stock this year on improving EPS, cash flow reasonable++ PRASM. There is a lot of fast $$$ in the group trading on both sides. Relax---the risk/reward over the next 6-12 months remains quite favorable.
Thursday's jobs report is good for airlines..if economy/jobs continue to strengthen will be very good for airlines imo. DAL June numbers were a negative surprise but barring a spike in fuel prices and/or an economic slowdown, AAL should do fine. AAL's June numbers may indeed be solid and any above expected merger savings will be a further stock catalyst.
You make valid points about the situation with the stock. I am hoping they can give us some good numbers and maybe surprise to the upside. Another thought is that American was being mishandled by management for quite a few years and we always heard the excuses for it. I'm hoping that the new managers came in and saw some amazing chances to make fast changes that will result in better performance. I know they are rebanking the AA hubs, and hopefully doing other things to improve the airline. It will take time but some nice results that do not disappoint would be great.
and by the way DAL is trading at 12X 2014 EPS, whereas AAL is about 7. I thought it's a matter of agreement that at worst, AAL is AT LEAST as good as DAL, which if true means at the DAL mulitple, AAL should be trading at near $60.
But since we (or most analysts) think AAL is a better run, better prospect airline, why on earth would you say moving up from the current $42 is going to be difficult?
andevenabs ... from your post last Thursday ... you have to be careful comparing DAL's PE and AAL's. Even though DAL doesn't pay taxes, they have to report earnings on an after tax basis. The PE's for both are essentially the same on an apples to apples basis.
you're talking out of both sides of your mouth.
Bottom line is Delta is not AAL, and based on 2014 and 2015 estimated EPS, AAL is still very cheap, and arguably, the best single value play in the S&P 500.
If it isn't, tell me which is better? Possibly Gilead, but that is riding entirely on Solvadi.
You say it's going to be difficult for AAL to move up at less than 7X 2015 EPS? What?
This is a industry growth story and AAL is at the forefront along with LUV.
I think many people are going to be very sorry they sold here, especially when at the current market multiple, AAL could be well north of $100 in 2015.
Sentiment: Strong Buy
I think you have taken my comments out of context.
If you have read my posts, you would know that I am bullish on AAL shares, I just think it is going to take more time and I feel quite certain that the market will make AAL prove everything, the market will not fully give AAL the benefit of doubt.
I must admit that I do not agree with your your targets. within the specified timeframe IMHO , they are completely unrealistic , all things being considered.
as a long time holder of lcc/aal it has been typical of dal announcing and disappointing and would bring the group down only to have lcc come out days later with their numbers and take the stocks back up...parker and his team have historically been conservative on the numbers and i suspect this will pan out the same...seems dal was way too aggressive on the numbers by forcasting 5-7% vs aal forcasts 4%....
I can't say I agree with you on this one.
1. if what you say is true then DAL should have been down further today and AAL should have bounced up with the rest of the market. Instead we actually got the exact opposite. DAL bounced and AAL sold off further.
2. your assertion about the guidance just is not accurate. AAL long ago guided 4 -6 percent prasm increase FOR THE QUARTER and on june 9 raised that same quarterly guidance to 5-7 percent, MATCHING DAL's quarter guidance. And DAL's announcement of 4.5 PRASM up, was just for june, they still reiterated their full quarter of 5-7 percent yesterday.
Mind you, I think that both company's full quarter numbers will be very profitable, but as you know it is not just a matter of the raw number, there are other things that go into stock market reaction/assessment.
Everyone is assuming AAL results will follow DAL and as long holder of AAL from LCC purchases in the single digits...the "smart money" has been consistently wrong about LCC/AAL performance.
Dallas is not Atlanta. Different economies and that alone is enough to differentiate performance metrics between AAL and DAL. Further, DAL is under new pressure from the new AAL in corporate travel bookings that didn't really exist until the last quarter Analysts never understand how corporate air contracts work directly with companies or travel agencies. Probably no one on this board does either. AAL may be taking marketshare from DAL and UAL.
Agreed. However, do you think it could be a long term positive for earnings, with eps at about 2 bucks getting ahead of itself. the street seems to have really high expectations and it was concerning me of an over-promise and under deliver situation occurring. Maybe a little negative news on delta will help AAL and even DAL when earnings come out, since any revisions up to that point shouldnt get out of hand, allowing them a better beat. or am i just looking for a silver lining? thoughts?