(Bloomberg) – American Airlines Group Inc., the United States’ largest operator with the shortest term, came after a mention on Reddit’s Wall Street Bets forum.
“AAL the next GME?” said Reddit user u / cardiffgiantthe1st in an online discussion on Wednesday, referring to stock tickers from American and GameStop Corp., the video game retailer that quintupled in value just this week.
American’s stock gain adds to a flood of stock rises this week, with retail traders fed by Reddit taking on short sellers and driving up prices. With stock after stock, legions of day traders identified companies with high levels of short interest and accumulated. In the case of GameStop, the rising price has forced many short sellers to give up their positions.
American rose 6.6% to $ 16.56 at the close in New York, the biggest increase since December 3, after reducing gains from an intraday hike of up to 15%. Other companies on a Standard & Poor’s index for major US airlines have fallen.
The Fort Worth, Texas-based carrier declined to comment.
The gain is “not justified by anything fundamental,” said Darryl Genovesi, an analyst at Vertical Research Partners, by email. He expressed the same opinion about the increase in shares during the session of another company he covers, Virgin Galactic Holdings Inc.
Risk of short compression
The share sold as a percentage of American’s free float is around 29%, according to data from S3 Partners. No other major US airline has interest interest of more than 5%.
American is due to release its fourth quarter results on Thursday. Like its rivals, the airline has faced the unprecedented collapse of air travel because of the coronavirus pandemic.
Following American’s lead, CFRA Research changed its recommendation on strong selling shares and raised its target price from $ 8 to $ 19.
“We think the stock is a high risk for one of the recent short-term pressures driven by the retail investor that we saw happening,” wrote CFRA analyst Colin Scarola in a customer note.
The company also elevated Spirit Airlines Inc. from sale to maintenance for the same reason. The interest sold corresponds to about 16% of Spirit’s free float, according to Vertical Research.
(Updates to the 8th paragraph with CFRA comments on American, Spirit.)
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