American Airlines, Alaska Air Are in Solid Shape. Why One of the Stocks Caught a Downgrade.

Raymond James upgraded Alaska Air stock to Outperform and downgraded American Airlines. (Photograph by Jason Redmond/AFP/Getty Images)

Domestic air-travel demand is gaining momentum, but not all airline stocks will reap the full rewards, one Wall Street analyst argues.

Savanthi Syth of Raymond James upgraded Alaska Air Group to Outperform from Market Perform and introduced a $70 price target in a research note Monday. At the same time, Raymond James downgraded American Airlines Group to Market Perform from Outperform and reiterated a $14 price target.

Alaska Air stock was up 0.5% to $59.82 on Monday, while American Airlines stock tumbled 3.9% to $13.02.

Travel demand has ticked back up since the tariff-driven shocks of the spring, Syth said. To date this quarter, TSA passenger throughput is up 1% from 2024 and 7.1% compared to 2019—the last year before the Covid-19 pandemic.

“Our recent checks indicate that this demand momentum (leisure and corporate) is being sustained,” Syth wrote.

That’s good news for airlines, but American Airlines stock is already approaching Raymond James’ previous $14 price target, having climbed 18% in August. The downgrade, Syth said, is about the share price coming into better risk-versus-reward balance.

Alaska Air shares, on the other hand, still have room to run, Raymond James believes. In addition to the industrywide demand trends, the company is benefiting from reduced overlap on many of its routes, particularly from struggling low-cost competitors Spirit Airlines and Frontier .

The company has a dominant position at key airports on the West Coast, a history of strong execution, and a solid balance sheet. The combination makes Alaska Air “an attractive option for long-term focused investors,” Syth said.

Shares are down 8.1% this year as of Friday’s close, but have risen 69% over the past 12 months.

Write to Nate Wolf at nate.wolf@barrons.com