Market is definitely neurotic and for some pretty good reasons..oil, currencies, geopolitics, some weak reports but imo Fed statement today was a positive.
Assuming the market stabilizes, my best guess is pps will not go much below 50$ which would be a 10% correction from high...think today was more of a market issue than aal/airline issue. Covered today some of the 55$ March calls I sold...
Love the margins but mostly due to fuel savings which imo are being discounted by the market..imo aal is underrvalued but right now the market does not share that view. the market as we all know hates uncertainty and aal has a lot of it this year...
Yup, aal has some weak routes apparently and more competitive pressures than most of the other airlines. As I have said before, there were very good reasons aal went BK and they will not be fixed overnight, will take time and 2015 has major merger hurdles to clear which imo they will but other airlines do not have.
IMO the market is discounting the following over the next year or two: fuel increases, flat to down prasm ,taxes, Venny/Int'l issues/currency, merger/union challenges .Probably forgot something, fact is while fuel savings will likely we huge, most of aal's other metrics are not very positive and the fuel savings may be a one off.. I am still holding but imo we will have to be very patient until we have some non fuel positive news which may not come until the 1q report which hopefully will be a strong beat if analysts do not crank up their estimates..
I am actually down a lot and would like nothing more than pps to recover. Selling calls on some of my shares and buying back some puts mitigated my losses by about 25%.
"If you think the big money didn't have a good idea what was coming this is not the place for you in general. The run up from 50 was the likely result of their thinking. " Actually was what I was thinking also, guess I would be big money...
Apparently I was the only one on this board that hedged because frankly today's action did not surprise me . I sold some calls and covered some puts yesterday and almost sold shares I recently added at 49-50$. I am still bullish on aal but have not covered my calls .
My point is the prasm guidance is THE reason pps is down and why it is down more than dal/ual, that is it...just stating the obvious which everyone else on this board seems to be unwilling/unable to acknowledge.
One really big positive of course is the 13-15% margin guide which Parker said will lead aal's peers, this is huge and it is something he has said for awhile. As long as demand holds up, bottom line is aal is going to make a shtload of money this year that is NOL sheltered up to I believe 10B. The NOL's are a big deal as they provide aal with muchgreater net cash flow to buy shares, improvements, etc.
Don't want to give the impression I am bearish because I agree with you that even with negative prasm, revenue/profits will be very strong , just that is so obvious to me that prasm is the big issue with the ccall that is causing pps weakness..
That may all be true but until analysts confirm it the market imo will focus on the fact that aal is guiding for 1q prasm of negative 2-4% when dal and ual are basically guiding for flat prasm. Also, aal indicated that they are seeing competitors add flights/routes and some capacity, this plays into fears of over capacity, fare pressure...really need some positive analyst comments to see pps recover imo. I have not covered the calls I sold yesterday because I have a hard time seeing a big bounce back at least for the very short term.
One of the main reasons I sold calls was due to the weak prasm and it proved to be the boogie man in the ccall. PPS had bounced into the black on fuel guidance and than immediately dropped on prasm guidance. In fact I was getting ready to buy shares until I heard the prasm guidance.
With estimates around 1.85 that would be a big beat, have to see if estimates get increased. Right now the market is clearly not thrilled with the prasm guidance but that will likely change as analysts chime in on estimates for 1q and 2015..January numbers will be coming out soon ...
From my notes , management clearly stated that negative prasm in 1q was due primarily to increased competition. We shall see what the analysts takes are on the negative prasm issue. The fact is that aal stock is only up about 20% since they reported weak prasm with I believe the June report, prasm is a big deal, little bit of kool aid drinking on the board today. There are a lot of positives with the report today but the prasm numbers are a CLEAR negative, no whitewashing it away.
PRASM is weak basically due to increased competition in several markets. Will be interesting to hear analysts comments, their take on huge fuel savings vs. prasm weakness.
No I did not, sold on about 1/3rd of shares..if prasm outlook didn't come in weak we would be sitting pretty with this market selloff.
Clear reason pps getting hit and main reason stock has been trading at a compressed multiple and of course market selloff not helping. Getting spanked but glad sold some calls and bought back some puts yesterday to cushion a little..
Airlines one of few sectors positioned well per market turmoil due mostly to oil plunge...as long as US economy holds up decent, aal/airlines will do very well in 2015. If US growth slows we could see 10-15% market correction..off to ccall.