Murphy’s Law suggests that if something can go wrong, it eventually will. This year we have Ebola to scare off profits from purchasing stock, for the Airline Industry at least. It’s a big surprise that American Airlines Group Inc (NASDAQ:AAL) and Delta Air Lines, Inc. (NYSE:DAL) are down almost 12.5% and 3% to about $31.3 and $33.10 respectively, considering the huge drop in the price for crude oil. CNBC’s special guest offered some insights on the matter.
“If you’re looking in American Airlines stock, the oil goes from $100 to $80, that $20 is worth $1.8 a share in earnings. And that’s, I don’t know what multiplier you put on it, but say it’s 10 times that’s $18 a share. The stock’s down $14, so it’s telling you that fundamentals are really run over by technicals,” said Mark Okada, Highland Capital CIO.
It gets even more complicated to comprehend how Delta Air Lines, Inc. (NYSE:DAL) and American Airlines Group Inc (NASDAQ:AAL) stocks responded so differently to the news of the spreading disease, because the routes covered by the two sky kings are very similar. In any case, this differentiation will not shed enough light into the problem for us to see how everything will fare from this point onward.
“This is a point where prediction is really a difficult thing to do. I don’t think we’re ready to make those kind of calls, but preparation is obviously really important. You got to sit here and have some extra cash and have things that are high quality so you can take advantage of some of the trades that are coming up here,” suggested Mark Okada.
Currently, American Airlines Group Inc (NASDAQ:AAL)’s price per share is 2.2% below throughout the trading day and Delta Air Lines, Inc. (NYSE:DAL) stock is 0.6% percent under its yesterday’s closing value and this might go on through the hype of economic slowdown and disease threats.
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