Categories Industrials

American Airlines (AAL) stock dips to a 6-year low on coronavirus outbreak

American Airlines Group Inc. (NASDAQ: AAL) stock plunged to a 6-year low of $14.46 on Monday as the industry continues to be battered by travel restrictions that have been imposed by governments around the world due to the COVID-19 outbreak. The stock has fallen over 47% in the past three months as investors remained concerned about the recovery of the airlines from the virus outbreak.

The company continues to face an increase in the additional costs and expenses associated with the coronavirus outbreak as the cleaning procedures are beefed up for its aircraft. The cleaning includes all the hard surfaces, including tray tables and armrests, sanitizing catering equipment, tableware, dishes, cutlery, linens, gallery equipment, and headphones.

American Airlines
Courtesy: Ross Sokolovski on Unsplash

In addition, American Airlines will be experiencing lesser customer traffic due to coronavirus fears. Already, the company has canceled flights to and from mainland China and Hong Kong, Seoul, South Korea, and Milan, Italy. The airline has also initiated a waiver of changes fees on all new travel booked between March 1 and 31.

On Monday, the US stock market experienced a temporary halt in the early trade as the stocks dipped sharply due to the oil price plunge and coronavirus spreading fears. The market experts fear that the US economy could slip into a recession if the infection continues to weaken the stocks.

The confirmed cases of coronavirus totaled more than 109,000 worldwide and more than 3,600 deaths. Italy has been the worst-hit region outside China with more than 7,000 confirmed cases and the country has lockdown the northern region due to restricting the spread. In the US, there were at least 540 cases with California, Oregon, New York, and Washington State declaring emergencies.

Airline shares have been impacted by the plunge in travel demand. After the grounding of Boeing 737 Max aircraft, the industry has now experienced the worst nightmare as travel demand has lessened and government restrictions are rising due to the coronavirus outbreak to regions outside China.

Read: General Motors stock falls on coronavirus

American Airlines could experience a drop in the earnings for the near-term due to the virus spread. Despite the long-term forecast remaining not altered, the growth could narrow due to the rise in costs associated with the virus cleaning and seat filling promotions.

The company had huge plans to pay down its debt by using the profits during this year but the outbreak has shattered the dreams. As of December 31, 2019, the company had a total debt of $33.44 billion while the total cash stood at $3.83 billion. The company has been paying dividend with a payout ratio of 10.55%.

The stock has fallen over 52% in the past year and remained undervalued with a 25% estimated return. In performance outlook, the shares are expected to be negative in the near and long-term with bearish momentum likely to continue at least in the near-term. The stock is below the 50-day moving average of $25.64 and the 200-day moving average of $27.53.

Listen to on-demand earnings calls and hear how management responds to analysts’ questions

Most Popular

360 DigiTech (NASDAQ: QFIN) Q3 2021 Research Summary

The positive effects of widespread digitalization and e-commerce growth on China’s financial services industry became more pronounced during the pandemic as the movement restrictions drove more retail customers to online

Activision Blizzard (ATVI): Three reasons why this stock deserves to be on your radar

Shares of Activision Blizzard Inc. (NASDAQ: ATVI) were up 1.6% on Thursday. The stock has dropped 14% since the start of the year. The company has been in the news

IPO Alert: Here’s all you need to know about Remitly Global’s upcoming market debut

The emergence of technology-driven financial services is making people think beyond conventional banks when it comes to availing loans and transferring funds. In a move aimed at taking its business

Add Comment
Viewing Highlight