Shares of American Airlines Group Inc. have tumbled enough in the past week and long-time bearish analyst Scott Group at Wolfe Research said it was time to stop selling.

Scott raised his rating on the Texas-based air carrier to peer perform, after being at underperform for at least the past three years. He removed his stock price target, while his prior target of $14 had made him the most bearish of the 22 analysts surveyed by FactSet.

His upgrade comes after the stock

tumbled 14.9% over the previous six sessions to close Thursday at $14.12, or just a fraction above its prior target. That compares with an 11.6% drop in the US Global Jets exchange-traded fund.

and a 0.8% loss in the S&P 500 index

over the same time.

On Friday, the stock slumped 2.1% in midday trading toward a 2 1/2-month low, while the Jets ETF dropped 2.3% and the S&P 500 shed 1.0%.

And despite this recent selloff, short interest, or bearish bets on the stock, remains relatively high.

,[American’s stock] remains heavily shorted with a 10% short interest, but it’s been consistently executing and making/beating estimates in recent quarters while running a fairly clean operation,” Scott wrote in a note to clients.

The company have been profitable the past three quarters, and has beat bottom-line expectations in seven of the past eight quarters.

Short interest, or the number of shares shorted, represents 9.77% of the public float, or shares available for public trading, according to the latest exchange data. That compares with 3.41% for Delta’s stock and 4.39% for United shares.

Some on Wall Street view high short interest as a bullish sign, as those who have made those bets will have buy back the stock if it starts rallying, an action referred to as short covering. The the “meme-stock” craze had involved heavily shorted stocks. Read more about how short selling works,

In addition, Scott said that while American Airlines still carries a high debt load, he believes the company will significantly reduce its debt this year given his expectation that free cash flow will exceed $2 billion in 2023.

And one reason for his previous bearish stance was that American’s margins had previously “badly and consistently” lagged that of rival Delta Air Lines Inc.
and also “consistently lagged” that of United Airlines Holdings Inc.

“But in recent quarters, the margin gap vs. [Delta] has clearly narrowed, while it remains choppy relative to [United]Scott wrote in a note to clients.

American Airlines stock has rallied 8.7% over the past three months, while the Jets ETF has tacked on 2.1% and the S&P 500 has gained 2.1%.


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