American Airlines stock has had a rough few years on Wall Street. Shares slid from the mid-$50s in 2018 to $18.15 at the time of writing.
Now, one of the airline’s longtime bulls has just given shareholders a reason to pay attention again.
Morgan Stanley analyst Ravi Shanker refreshed his outlook on American Airlines (AAL) this week, and the new number tells a story about where the carrier may be headed next.
Morgan Stanley lifts its price target on American Airlines
In a research note Morgan Stanley shared with me on July 1, Shanker and his team at the investment firm raised the price target on American Airlines stock to $24 per share, up from $20, while maintaining an “Overweight” rating.
The firm’s note followed investor meetings in Chicago with American’s CEO Robert Isom, CFO Devon May and investor relations chief Neil Russell.
Shanker’s team described the setup as “gratification deferred.” In plain terms, that means American has been doing the work behind the scenes, but macro noise, namely jet fuel costs and industry turbulence, kept the stock from showing it.
The analysts believe the market will start rewarding American Air as that work becomes visible in the numbers.
The firm sees the stock potentially returning to the low $20s in the near term, with more room to run over time, per the note.
Why American Airlines investors have been nervous
It has not been an easy stretch for American Airlines shareholders. The company was removed from the S&P 500, and its stock has significantly trailed the broader market over the past five years.
At the company’s annual shareholder meeting on June 10, CEO Robert Isom did not sugarcoat it. He told investors the stock “isn’t where we want it to be,” adding:
“Frankly, it’s not where it should be given the strength of our value proposition relative to the rest of the sector. The most important action we can take to improve our stock performance, both this year and over the long term is to strengthen our financial performance, particularly our margins.”
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Isom pointed to jet fuel as the biggest drag this year. Fuel expense jumped by more than $5 billion year over year, which he said is why 2026 earnings are now expected to come in roughly flat compared to 2025, even though revenue has been outperforming plan.
Isom also shut down speculation about a merger with United Airlines. He told shareholders the company explored the idea and got clear feedback from regulators “across the entire political spectrum” that such a deal would be a nonstarter.
What will drive AAL stock profit margins?
Morgan Stanley pointed to several moves already in motion at American Airlines.
- On the network side, the analysts said a Federal Aviation Administration directive at Chicago O’Hare has allowed the airline to restore capacity to pre-pandemic levels.
- AAL is also investing in hubs in Phoenix, Philadelphia, Washington and Miami, where it already controls gates and sees strong demand growth.
- American Airlines balance sheet is also in better shape. Morgan Stanley said gross and net debt are at their lowest levels since 2015, to achieve a BB credit rating and net leverage around 3x.
- The firm added that American’s fleet needs fewer near-term replacements than rivals, which should keep capital spending steady for years.
- Moreover, American is leaning into premium seating, airport lounges, faster WiFi and loyalty perks, a strategy management believes will separate the airline from budget competitors.
Is American Airlines fundamentally strong or weak?
Financial data paints a mixed picture, helping explain why investors remain split on the airline stock.
On the positive side, American generated $4.2 billion in cash from operations in the first quarter of 2026, with free cash flow jumping 109% year over year to $3.4 billion.
Total revenue for the quarter came in at $13.9 billion, up nearly 11% from a year earlier.
The concerns show up on the balance sheet.
American Airlines carries roughly $67.8 billion in total liabilities against $63.7 billion in assets, leaving shareholders’ equity at negative $4.1 billion.
Airlines in general run on borrowed money: planes, gates, and loyalty programs are financed with debt rather than equity.
More Airlines:
- Another low-cost airline leaves 6 cities, refunds available
- Delta Air Lines cuts two flights forever, refunds available
- Spirit Airlines won’t be coming back, and that costs flyers money
Combine that with pension obligations and lease liabilities sitting on the balance sheet, and it’s common for legacy U.S. carriers to show negative or thin equity for years.
A company can remain in negative equity for a long time as long as it continues to generate cash and can service its debt.
Where it becomes a real risk is if cash flow weakens or credit markets tighten. Negative equity gives a company less of a cushion to absorb a bad year, since there’s no equity buffer left to fall back on.
Long-term debt sits at $23.5 billion. Profitability has also been inconsistent quarter to quarter, with the company posting a net loss of $382 million in the first quarter of 2026 after a small profit in the prior quarter, reflecting the seasonal nature of airline earnings.
Taken together, American looks like a company generating real cash and improving its debt load, but one still working to overcome a thin and uneven bottom line.
That lines up closely with how Morgan Stanley framed it: real progress that has not yet fully shown up in the stock price.
For now, Wall Street’s message to American Airlines shareholders is patience. If the airline strings together a few clean quarters without fuel shocks or industry disruptions, the $24 target may end up looking conservative rather than ambitious.
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