American Airlines: Buy AAL Stock At $12?

Published: Thursday, September 18, 2025 at 10:30 am

American Airlines Stock: A Buy at $12?

American Airlines (AAL) stock has experienced a significant downturn, dropping 27% this year. This decline comes despite falling fuel costs, as investors reacted negatively to the company's revised forecast, which includes an expected loss for the third quarter. Weak domestic demand and challenges related to balance sheet and labor costs have further contributed to a negative outlook, even though the airline showed a solid performance in the second quarter.

The question arises: Is AAL a worthwhile investment at its current price, hovering around $12? While the stock presents risks, its low valuation could make it attractive. Compared to the broader market, American Airlines appears inexpensive based on price-to-sales, price-to-free cash flow, and price-to-earnings ratios. The company's price-to-sales ratio is 0.2, significantly lower than the S&P 500's 3.2. Similarly, its price-to-free cash flow ratio is 5.2, compared to the S&P 500's 21.1, and its price-to-earnings ratio is 14.4, versus the benchmark's 24.2.

However, American Airlines' financial performance reveals weaknesses. Revenue growth has been moderate, with a slight decrease in recent years. Profit margins are considerably worse than those of most companies. The operating margin is 5.1%, significantly below the S&P 500's 18.6%. The net income margin is a very poor 1.0%, compared to the S&P 500's 12.6%. The airline's balance sheet also appears weak, with a high debt-to-equity ratio of 454.1%, far exceeding the S&P 500's 20.9%.

Furthermore, AAL stock has demonstrated poor resilience during market downturns, underperforming the S&P 500 in the Inflation Shock of 2022, the COVID-19 pandemic of 2020, and the Global Financial Crisis of 2008.

BNN's Perspective:

While American Airlines faces significant challenges, its low valuation and potential positive catalysts, such as declining fuel costs, make it an intriguing option for long-term investors. However, investors should be aware of the inherent risks associated with individual stocks and consider the High Quality Portfolio for a potentially less volatile investment.

Keywords: American Airlines, AAL, stock, investment, valuation, financial performance, revenue, profitability, debt, downturn, S&P 500, buy, sell, market, fuel costs, High Quality Portfolio

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