American Air’s $1 Price Target at Evercore Implies 92% Collapse


(Bloomberg) -- American Airlines Group Inc. received a big blow from Wall Street on Friday as Evercore ISI analyst Duane Pfennigwerth slashed his price target on the Fort Worth, Texas-based carrier to $1 from $10.

That would imply a 92% rout in the stock, which closed at $12.01 on Thursday.

The airline, which entered the coronavirus-fueled crisis with the weakest balance sheet in the group, may not see “meaningful” recovery in its share price, the analyst said. As American, and the entire industry, tries to raise additional liquidity, Evercore estimates its net debt will far exceed revenue by the end of this year.

American’s total debt stood at a little more than $34 billion as of March 31.

Pfennigwerth expects American’s net debt to Ebitdar ratio to stand at about 9.8 times on reduced 2021 estimates. The analyst now expects a 2020 loss per share of $13.90, compared to a prior estimate of a $6.90/share loss, and a 2021 loss/share of $1.55, down from a profit estimate of 75c.

“Parts of American’s earnings call yesterday struck us as out of sync with the severity of this crisis, such as the unwillingness to put a long-term network restructuring on the table,” the Evercore analyst wrote, adding that “equity investors may not be the target audience for these earnings calls anymore.”

While all airlines have seen their stocks decimated thanks to the coronavirus outbreak causing travel demand to dwindle, American has been among those hit especially hard. The S&P Supercomposite Airlines Industry Index is down a staggering 56% since mid-February, when the virus-related market selloff began. United and American are the two biggest decliners in the index so far, falling 65% and 60%, respectively. The S&P 500 Index is down 16% over the same period.

©2020 Bloomberg L.P.

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