Is American Airlines the next GameStop? Reddit's WallStreetBets says maybe
American saw shares close up more than 6% Wednesday and will report earnings Thursday
Could American Airlines' stock become the next GameStop? Reddit users believe it may be possible.
American Airlines surged more than 10% on Wednedsay morning after one discussion on Reddit's WallStreetBets forum posed the question, "AAL next GME?"
GAMESTOP STOCK FRENZY ENTERS WHITE HOUSE REALM
"Thoughts? AAL majorly shorted when all the other airlines aren’t," one user wrote. "Let’s get this bread wsb!!" (wsb stands for “r/wallstreetbets” a forum or “subreddit” on the popular social platform Reddit, where the discussion centers around investing -- especially speculative investing).
The Verge reported late Tuesday that the forum has decided to switch to private instead of public due to increased activity.
But before the switch occurred, one user replied that they think American Airlines stock is a "good one," noting that "GME is unique, but AAL could hit 30 soon."
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| GME | GAMESTOP CORP. | 27.27 | -1.78 | -6.13% |
Another user chimed in with agreement, writing "Might hit $30 tomorrow with this market. I doubt the big traders will let this opportunity pass them again."
However, not everyone on the forum agreed that the airline -- which number one in carrying passengers in 2019 before the pandemic hits -- would be a safe bet.
"Do what you want with your money, but AAL is a lot bigger than GME," the user said. "Airlines have been showing bad earnings so far and tomorrow could be bad for American. Don't forget that GME and AMC started with good news."
American Airlines, whose stock closed up more than 6% Wednesday at $16.56, its highest level since Dec. 3, will report fourth-quarter earnings on Thursday. Like its competitors, American has struggled as the coronavirus pandemic has ravaged demand for air travel.
A spokesperson for American Airlines did not immediately return FOX Business' request for comment.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| AAL | AMERICAN AIRLINES GROUP INC. | 14.64 | 0.00 | 0.00% |
The discussion on Reddit comes as CFRA Research changed its recommendation on American Airlines shares to hold from strong sell and lifted its price target to $19 from $8.
“We think the stock is a high risk for one of the recent retail-investor-driven short squeezes we’ve seen play out,” CFRA analyst Colin Scarola wrote in a client note.
American Airlines is the most shorted major U.S. carrier, with roughly 171.3 million of its 610.8 million shares outstanding, or about 28%, currently sold short, according to S&P Capital IQ.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| UAL | UNITED AIRLINES HOLDINGS INC. | 97.44 | +0.61 | +0.63% |
| LUV | SOUTHWEST AIRLINES CO. | 33.00 | +0.64 | +1.98% |
| DAL | DELTA AIR LINES INC. | 63.41 | -0.41 | -0.64% |
In comparison, short-seller interest for shares of United Airlines, Southwest Airlines and Delta Airlines are all under 5%, with United at about 4.4%, Southwest at 2.9% and Delta at 2%.
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American Airlines has become the latest potential target in amateur investors' crosshairs after Reddit users banded together to buy up GameStop's call options, causing the struggling retailer's shares to soar to unprecedented levels and hurting market short-sellers.
GameStop had been fighting the economic trends of the last decade as demand for video game discs dropped following technology advances that allow instant virtual purchases of games – removing the need for the game supplier or the store.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| AMC | AMC ENTERTAINMENT | 5.04 | +0.09 | +1.82% |
| BB | BLACKBERRY LTD. | 2.56 | -0.01 | -0.39% |
| BBY | BEST BUY CO. INC. | 90.93 | +0.93 | +1.03% |
Other stocks recently targeted include AMC, Blackberry Limited and Bed Bath & Beyond, who, in addition to GameStop, have all seen triple-digit percentage increases over consecutive trading days.
According to Dow Jones Market Group, GameStop, AMC and Bed Bath & Beyond have seen increases of 762%, 538% and 103%, respectively, over the past five consecutive trading sessions while BlackBerry Limited has seen an increase of 237% over the past nine consecutive trading sessions.
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The market chaos resulting from the gyrations has caught the attention of the White House, Treasury and SEC who have all said they are monitoring the situation after TD Ameritrade and Charles Schwab's mobile apps to experienced outages in response to "unprecedented volumes" during trading on Wednesday morning.
Fox Business' Suzanne O'Halloran and Caitlin McFall contributed to this report.