Airline sector exchange traded funds caught a tailwind Thursday after American Airlines (AAL) beat analysts’ expectations.
The U.S. Global Jets ETF (NYSEArca: JETS) increased 3.2% on Thursday.
Meanwhile, American Airlines shares advanced 9.3%. AAL makes up 10.1% of JET’s underlying portfolio.
American beat analysts’ profit expectations for the fourth quarter of 2020, with earnings per share at a negative $3.86, compared to the median forecast at $4.11, the Wall Street Journal reports.
In absolute terms, the results were still terrible. The company posted a $2.2 billion quarterly loss, one of its worst quarters ever.
However, coordinated investors are taking on outsized bearish short plays on company stocks, which may have included American Airlines. After brokerage platforms barred users from trading on plays like GameStop and AMC Entertainment Group, hungry traders turned their attention to other targets.
“GameStop 2.0! I do think that some of it is related to short-sellers and those that are looking at some of these short-term opportunities to push stocks around,” Paul Nolte, portfolio manager at Kingsview Asset Management, told Reuters.
AAL is the most shorted major U.S. carrier, with 25% of its shares outstanding currently sold short in bets against it, according to FactSet data. The airline carrier is also unpopular, with lowest profit margins among the big U.S. carriers, a slowdown in the adoption of new technologies, and a debt load that is one of the largest in the industry.
The company did not provide any hopeful guidance Thursday for the quarter, projecting revenues to fall as much as 65% compared to the same period of 2019, as higher Covid-19 cases and travel restrictions cut down on travel demand. Meanwhile, Wall Street analysts are arguing that American could sell new shares to raise cash in this feverish market.
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