Shares of American Airlines Group Inc. swung to a gain at Thursday’s close, erasing a sharp loss early in the session to snap a long losing streak, as continued improvement in travel demand helped fend off, for the moment, concerns over a recent surge in new COVID-19 cases.
American Airlines’ stock AAL, +0.99% closed up 1.0% at $13.17, erasing a loss of as much as 6.6% at its intraday low. The gain snapped a six-session losing streak, the longest since the six-day stretch ended April 2, in which the stock had tumbled 23.4%.
The stock’s late rally into positive territory comes after the air carrier announced a $4.5 billion boost to liquidity this week, including a $2.5 billion notes offering that priced late Wednesday and $2 billion worth of common stock and convertible debt offerings that priced on Tuesday.
Advertisement
The offering of $2.5 billion senior secured notes due 2025, which was upsized from $1.5 billion, priced slightly below par — 99% of face value — despite paying an interest rate of 11.75% per annum. That compares with the yield on 5-year Treasury notes TMUBMUSD05Y, 0.313% of 0.32%.
FACTSET, MARKETWATCH
While the increased cash balances following the offerings “removes liquidity risk,” UBS analyst Myles Walton American’s “problem” isn’t the amount of cash it has, but how much cash it burns to operate. And with cash burn set to continue, “the return to normalized earnings is so far out that material downside remains for the equity,” Walton wrote in a note to clients.
He reiterated the sell rating he’s had on the stock since late 2019, but trimmed his price target to $9, which is 28.5% below current levels, from $10.
NOW PLAYING:
How to Invest in Bonds
Visit our Video Center
American’s stock became part of a broader airline sector rally, as the U.S. Global Jets exchange-traded fund JETS, +1.53% climbed 1.5% to bounce of Wednesday’s three-week closing low. The Jets ETF, which dropped 5.9% on Wednesday to suffer a fifth loss in six days, has lost 24.4% since closing at a three month high of $21.94 on June 8.
Among the sector tracker’s other more-active components, shares of United Airlines Holdings Inc. UAL, +4.89% ran up 4.9%, Delta Air Lines Inc. DAL, +2.45% climbed 2.5%, Spirit Airlines Inc. SAVE, +2.83% hiked up 2.8%, Southwest Airlines Co. LUV, +2.23% advanced 2.2% and JetBlue Airways Corp. JBLU, +4.04% rallied 4.1%.
The Dow Jones Transportation Average DJT, +1.13% , which includes six airline components, rose 1.%, while the Dow Jones Industrial Average DJIA, +1.17% jumped 299.66 points, or 1.2%.
Helping fuel the rally, data from the Transportation Security Administration (TSA) shows that the number of people going through traveler checkpoints continues to increase.
Fuel for Investing Smarter
Make the smartest investment decisions with access to Barron's in-depth analysis and unrivaled market predictions -- all conveniently accessed on MarketWatch.com. Limited-Time Offer: $12 for $12 Weeks.
LEARN MORE
The average daily number of travelers for the week ended Sunday has increased for nine straight weeks, to reach 522,327 in the latest week, up from a trough of 97,799 for the week ended April 19, according to a MarketWatch analysis of TSA data. Meanwhile, the decline from a year ago in average daily passengers per week has decreased each week, to 80.0% in the latest week from a peak of 95.8%, also for the week ended April 19.
Advertisement
More ominously, however, the number of new cases of the coronavirus illness in the U.S. rose to 34,700 on Wednesday, the highest level since the peak of 36,400 seen in late April, according to the Associated Press, with data aggregated by Johns Hopkins University of Medicine indicating 30 states are seeing increased infection rates over the past week.
AI
