Is American Airlines (AAL) Headed for a Breakout?

American Airlines Group (AAL) is the world’s largest airline by scheduled revenue passenger miles. The firm’s major hubs include Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C. After completing a major fleet renewal, the company has the youngest fleet of U.S. legacy carriers…

American Airlines Group (AAL) has benefited with an improvement in air-travel demand in the United States. Delta cases of COVID-19 are falling, which helped the company see a 20% sequential improvement in third-quarter 2021 passenger revenues. AAL expects strong air-travel demand during the holidays in the fourth quarter.

As of the end of the third quarter, the company had $14.5 billion in cash compared to $2.6 billion in short-term debt. Over the past three years, AAL revenues have fallen an average of 17.6% per year. However, analysts expect sales to rise 125.8% year over year in the current quarter. This has led to a Growth Grade of B in our POWR Ratings system.

The stock appears very overvalued with a forward P/E over 1,000. AAL has shown mixed performance since July, but has been trending up since the end of October. This is evident in the chart below.

Take a look at the 1-year chart of AAL below with my added notations…

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