Here’s Why American Airlines Stock Has Shed More Than 50% Since Late 2018

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AAL: American Airlines logo
AAL
American Airlines

American Airlines Group Inc. (NASDAQ: AAL) stock price shed around 56% from $32 in 2018 end to $14 currently, primarily due to unfavorable changes in its P/S multiple. Additionally, the company witnessed a drop in its sales over this period, and combined with a rise in the outstanding share count, its revenues per share also decreased. Due to this, the stock has strongly underperformed the S&P, which returned a little over 60% over this timeframe.

In our interactive dashboard, Why American Airlines Stock Moved: AAL Stock Has Lost 56% Since 2018, we break down the factors behind this move.

(A) AAL’s Total Revenue has dropped 8.6% from $44.5 billion in FY 2018 to around $40.7 billion on an LTM basis

  • AAL’s total revenue first rose from $44.5 billion in FY ’18 to $45.8 billion in FY ’19, before dropping sharply to as low as $17.3 billion in FY ’20 due to the pandemic affecting flight travel.
  • However, the company’s sales have since recovered, rising steadily to almost $30 billion in FY ’21, and currently stand at $40.7 billion on an LTM basis.
  • As of FY ’21, AAL’s largest segment is the Passenger segment, making up around 87% of the company’s net sales, with Cargo and Other sales bringing in the remaining 13%.
  • For details about AAL revenues and comparison to peers, see American Airlines (AAL) Revenue Comparison
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(B) Revenue per share (RPS) decreased 24% from $81.67 in 2018 to $62.44 currently

  • AAL revenue dropped from $44.5 billion in 2018 to $40.7 billion currently, while the outstanding share count increased from 545.4 million in 2018 to 652.1 million currently.
  • Due to this, RPS has declined from $81.67 in FY ’18 to $62.44 currently.

(C) Price-To-Sales (P/S) multiple for AAL rose from 0.5x in 2018 to 0.6x by 2020 end, but has pulled back to 0.2x currently, less than half its 2018 level

  • Despite AAL’s weak performance in FY ’20, its P/S multiple rose from 0.5x in 2018 to 0.6x in 2020, on the back of rising investor expectations surrounding a revival in demand for the company’s services.
  • However, due to the increased economic uncertainty weighing on the broader markets and rising crude prices expected to weigh on margins, the P/S multiple has pulled back, currently standing at around 0.2x.
  • For additional details about the company stock returns and comparison to peers, see American Airlines (AAL) Stock Return Comparison.

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 Returns Jul 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 AAL Return 10% -22% -70%
 S&P 500 Return 6% -16% 80%
 Trefis Multi-Strategy Portfolio 9% -16% 232%

[1] Month-to-date and year-to-date as of 7/28/2022
[2] Cumulative total returns since the end of 2016

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