while I am on record that I see potential in shareprice appreciation for AAL in the intermediate term, I do not share your view of focusing mainly on P/E.
It is a common error , particularly among amateurs to believe that a stock is undervalued strictly because it trades with a low P/E.
My experience is that stocks trade with a low P/E for justified reasons more often than not.
I would note that there are plenty of risks to the analyst estimates , especially the farther out you get in time. Nothing is automatic or guaranteed.
And it would not take a signficant terror attack (which we are certainly at risk of) for it to happen
ie One ebola case in a western country could reduce travel and earnings in a very short time.
Airlines are a very risky business with the added negative of being highly capital intensive and subject to a myriad of different and varied risk types.
It is reasonable for them to trade with low P/E ratios.
those familiar with me, know that I want to avoid angst that all too often dominates these boards, and so I hold out the olive leaf of peace to you . However I do ask that you reconsider the false &misleading statements you have made about me/ or my posts of late.
1. I do not just show up when the" stock is down etc." as you wrote. I think it is fair to state that I have been consistently bullish on AAL for quite some time, albeit I am not one given to unbridled euphoria & extremes (either way) as I have also communicated.
2. I did not say that there would be downgrades of the stock. Re Jamie Baker , the comments I made refer to the fact that he has had the most bullish and highest earnings estimates for AAL. I know for a fact that he had been modelling a much higher pre tax margin estimate for the 3Q, and as a result of the recent disclosure I expect him to adjust down his estimates for the same metric and naturally for EPS for the 3Q. I expect to see that happen this next week in a note from him , covering his AAL views as well as other airlines. That is what I was communicating, nothing else.
( I should note that there are some analysts who were estimating even lower margins than guidance and they will likely raise them a bit ).
In general, (and this may be what you have detected in my posts and is what you don't like), there is some indication that the euphoria surrounding AAL stock has moderated, and I don't see that as unreasonable. I think the slope of performance is also moderating, and is reasonable. I share your view that if AAL can put the numbers up, quarter after quarter, that slowly p/e metrics can improve. But given the history and realities of risk along with shots fired across the bow of late, I believe AAL will not be given the benefit of doubt, it wil have to prove it first.
I am speaking about the pretax margin guidance for the third quarter , which is 10.5 to 12.5.
I think you misheard them , they did not say that is higher than previous guidance ( as today was the first time third quarter margin guidance has been given).
What they said it is better than a full year ago margins, but remember where the stock was a year and a quarter ago, It is also below the second quarter margins just completed. Some of the bullish analysts, like Jamie Baker had been modelling 13.6 margin for the third quarter. Obviously people like him will be cutting their earnings estimates.
right, compare that to some of the more bullish analyst expectations and you can see it is obviously a disappointment.
did you here Jamie Baker's questions?
he is the biggest bull on wall street for aal, and from his tone, I expect that to change.
Good thing they initiated the buyback and dividend, otherwise AAL could be lower today
there were two 8k's filed today, you must be looking at the wrong one.
Just find the 8k (second one on the list) which has "investor update".
for those wondering why the stock is not strong today, despite the good news of earlier than expected shareholder friendly moves of dividend and share buyback, the key metric that I can see weighing on the shares today is the disappointing forward guidance for third quarter margins, well below the now completed 2nd quarter.
It is not in the earnings press release, but in an 8k filing today.
Much is being made about Yellen's comments .
My understanding is that she has
1. made comment that some areas of the equity market, specifically biotech and social media have "strectched valuations
2. she says that is NOT the case with the general market.
My comment, clearly AAL does not fall in the stretched valuation portion , as its valuation is even much more conservative than the general market. It would not be out of line to state that AAL falls in a third category, of potentially undervalued securities.
Time and facts on the ground , ie good earnings and other shareholder value enhancing factors will straighten things out.
one has to chuckle at the short seller who in recent days saying that if AAL had any good news they would have reported it already.
Doug Parker knows how to run this company, and it is only a matter of time, not if, that fair value for the shares will be realized, and that fair value is HIGHER.
Remember that because of the old American airlines , prior to its merger with Doug Parker's USAIR, has net operating loss tax carryforwards, AAL can and will use them, thus hugely reducing taxes. So AAL 's big profits will go straight to the bottom line, and therefore straight to shareholder equity.
Future is very bright , and this is just the beginning of good news.
It is so typical, and imho WRONG to see extremism and dishonesty to dominate these boards.
I recently posted that those who posted it was going to be "easy" to go to $55 were out of touch with the realities . Those now calling for extreme downside are just as out of touch with reality.
And I note that these latest extremists have no conscience, using any lie or distortion to try and scare people.
One poster stated that if there was anything potentially good to report for june traffic that AAL would have already done so, stating that aal routine releases traffic data by the third business day of the month which is NOT TRUE. Those that have taken the time to consult with the company KNOW that AAL is scheduled and has been scheduled for a considerable period of time, to release june traffic data ON JULY 9th, that is tomorrow. Anyone telling you differently is lying or spreading falsehood. You can fill in your own reasons as to why they are doing that. (outright dishonesty or intellectual dishonesty to try to manipulate others through fear is my opinion)
While I don't believe that AAL is going to $70 anytime soon, or even $55 in the short term, I do believe that tomorrow AAL will report June traffic and it will meet their previous guidance which are very good fundamentals and which fly in the face of the recent shareprice action. So while I am not of the opinion that $55 in the short term is in order, if one looks out t 18 months, $55 is more likely than $30.
I still see catalysts for upside in the shares, such as shareholder friendly moves to return capital to shareholders, through dividends and share buybacks. I believe that AAL will eventually be added to the S&P 500 index which will boost the ownership of the shares and the shareprice. I believe that AAL has the best managment in the industry and that AAL represents the best value in the sector
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.
no melodias , that is just fiction , popular to make unsubstantiated claims on yahoo finance about, but just not true.
The last two days was real selling by real people.
as further evidence, note that it was just a short time ago that DAL shareprice was above AAL's and as people were thinking along the lines you have outlined ( myself included), more recently AAL not only set new highs but made up the difference between the sharprices and went further to clearly a higher shareprice than DAL. ( on a per share basis).
The market apparently sniffed out DAL's june performance shortfall in the above adjustment (dal and aal releative shareprice change) and is in the process of trying to find where AAL should be at this stage of the game.
I remain longer term bullish, and I have been consistent on that, that does not mean that I should have blinders on and not acknowledge that AAL long only has become a very crowded trade, and you know what happens with very crowded trades.
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.
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.
since it is rare that people will believe such things and that I prefer to remain anonymous on this board, please accept my apology for not specifically answering your question. Please do not take offense at this reply, I can assure you that none is intended.
I think it is ok, since the best criteria to use is to judge the content of the posts on their merit rather than "who" posts it.
Don't you agree?
those who are to receive the disputed claims shares this week are locking in their money by preselling by shorting the shares today. Big money seeing this , are naturally dropping their bids to take in the shares at the lowest lowball prices. Those who don't understanid what is happening and are selling are making a mistake, and those who don't understand what is happening and shorting naked (ie those not receiving the distirbution this week) are really making a big mistake and are going to get it in the teeth when they reverse this , up to new highs.
This is not a big distribution like we have seen in recent times , and with the preselling being done , combined with the powerfully positive fundamentals to be reported soon, this is a buying opportunity.
AAL fundamentals are very strong, and are finishing the quarter today locking in a truly marvelous performance. As such, I anticipate a very good earnings release for the 2nd quarter.
Additionally bookings are very strong, so the third quarter outlook is very positive.
I also anticipate other positive developments for AAL stock , and feel
IMHO, any weakness is gift and should be bought aggressively.
There are still a significant amount of people in the investing world who are by default stuck on the concept not recognizing the improvements to the business model for the industry, despite the reality that clear and large improvements in the model are in place
Additionally , there are also a significant number who are stuck on the concept that airline mergers are not that successful, despite the reality that Doug Parker has a proven successful track record.
As such, these people either are not invested in AAL , or underinvested.
This is the reason that AAL is still grossly undervalued.
It takes time for old ideas to be changed.
But as month after month, quarter after quarter pass, and the facts prove more and more people will come around to understanding the reality, that AAL is a money making machine. and they will invest more money in buying the shares. This will cause the P/E to expand , and the shareprice to rise as a result.
Additionally , as the earnings will continue to grow, you will see another boost to the shareprice.
As the above evolves, it is conceivable that the shares will one day become overvalued, as the momentum of the pendulum shifts, but that is a long long time from now, and perhaps at more than double the current shareprice.
I believe my 1.89 estimate to be on the conservative side, as I mentioned in my post. I would not be surprised if they exceed that number.
The profit sharing at this point of the game is insignificant ( I am modelling about 10 million for all of 2014) due to the merger.
As the merger matures, and profits continue to grow, we could anticipate that profit sharing plans could become more significant.