Wells Fargo Sees Positive Drivers for American Airlines (AAL) Offset by Higher Debt

American Airlines Group Inc. (NASDAQ:AAL) is one of the new stocks David Tepper has bought. As of December 29, the average price target for AAL suggests an upside of 4%; however, the Street high indicates an upside of 30%. In Q3 2025, David Tepper opened a new position in AAL, buying nearly 1.4 million shares worth $104 million.

On December 18, Wells Fargo initiated coverage of American Airlines Group Inc. (NASDAQ:AAL) with an Equal Weight rating and a $17 price target. The firm said that the airline’s new co-branded card deal and upgraded cabins were positive drivers for the stock, although these advantages seemed to be countered by higher debt and the requirement for premium service enhancements.

Wells Fargo noted that AAL is set to significantly strengthen under its exclusive Citi co-brand agreement in 2026, with cash remuneration expected to increase annually by 10% to approach $10 billion by 2030.

American Airlines' pre-tax income is projected to increase by $1.5 billion, or $1.70 per share, versus the previous twelve months ending Q3 2024. Wells Fargo noted that the debut of the AAdvantage Globe credit card, which provides an above-average 90,000 point promotional bonus along with new card features, should drive high-margin mileage sales from 2026 onwards.

Separately, a Reuters report dated December 17 noted that American Airlines is now focusing on premium upgrades on its flights to capture the luxury travel segment and win back passengers from competitors such as Delta and United Airlines. AAL is adding the new Boeing 787-9 and Airbus A321XLR aircraft to its fleet in order to offer a better travel experience on international routes. However, analysts note that tensions with labor unions are rising, Boeing is notorious for deliveries being later than scheduled, and employees are frustrated with low morale and a lack of accountability by the leadership.

While we acknowledge the potential of AAL as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: Dow 20 Stocks List: Ranked By Hedge Fund Bullishness Index and 10 Unstoppable Dividend Stocks to Buy Now.

Disclosure. None.