Airlines as penny stocks

Posted Jun 1st 2008 3:40PM by Douglas McIntyre
Filed under: Forecasts, Industry, AMR Corp (AMR), Delta Air Lines (DAL)

Many institutional funds shy away from stocks that sell below the $5 mark. It is assumed that most low-priced shares are a sign of trouble. In many cases that is true.

As some airlines become small caps, driven down as the price of oil comes up, several could drop below the $5 threshold. That may hinder these stocks from rebounding by eliminating them from some fund portfolios.

It is hard to imagine that AMR's (NYSE: AMR) stock trades at $7.19 and has been as low as $6. That puts the company's market cap at $1.8 billion. Some biotech companies with almost no revenue are worth as much. Delta's (NYSE: DAL) are at $6.15 and its market cap is about the same as AMR's.

Airline stocks are now the province of speculators and day traders. Since some may face Chapter 11, the gamble on owning the stocks is high now.

The shares of these companies have been swept into the dustbin.

Douglas A. McIntyre is an editor at 247wallst.com and author of Ten Stocks Under $10.

Tags: airlines, AMR, DAL, Delta

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Reader Comments (Page 1 of 1)

6-01-2008 @ 7:22PM

Chuck said...

U.S. Airlines or all? I own many shares of Lufthansa, Air Berlin and Singapore.. Time to sell those - at a profit ??

6-02-2008 @ 7:20AM

Bob said...

Rumor inside the airline employee ranks is that American Airlines is now talking to US-AIRWAYS about a some kind of potential combination/merger/alliance, since the recent demise of merger talks between USAIR & UAL.

6-02-2008 @ 9:52AM

John said...

Will MESA Airlines survive after Delta dropped their contract with them? If the court rules in favor of MESA over Delta, will it be too little too late? Or will the recent drop in oil prices from 135 to 125 have any effect? July 20 is the deadline date.

8-22-2008 @ 4:49AM

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