Investors should buy American Airlines because the airline’s valuation is too high to pass up, JPMorgan said. Analyst Jamie Baker upgraded the airline’s stock to overweight from neutral. Baker said this reflected a long-term shift in which the “big three” airlines – American, Delta and United – had taken the commanding ground from the “discounters”. “American Airlines’ goal of reducing its total debt by $15 billion by the end of 2025 is now 60% complete. While we have not yet defined American Airlines’ balance sheet as ‘fixed’, the pace of improvement is commendable and has exceeded our Expectations, however, are that the stock is now 35% below where debt peaks in the second quarter of 2021 — when demand recovery is just a Pollyanna argument and Americans are deep in the red,” Baker said in a note on Monday. wrote in the report. AAL 1D mountain American Airlines stock “In short, we no longer view AAL stock as ‘trapped’ by its debt load (as clearly as it was before, especially if the balance sheet repair process continues) and find its Current valuations … are too attractive to ignore, especially at a time of significant growth in international demand, not to mention an 82% Neutral/Sell consensus rating in the US,” he added. Baker also raised his price target to $29, implying a 109% upside for the stock from Friday’s close. U.S. stocks rose 2.4% in premarket trading on Monday. The stock has gained 9% so far this year. To be sure, the analyst said Americans are not entirely in the know. “In fact, from the current 5-year CDS implied probability of default, it has not improved much. Now to be fair, the (credit default swap) market is very technical, but the current market implies a 47% probability of default. The scenario assumes a 20% recovery,” Baker said. “Given current industry trends and the aforementioned balance sheet improvement, that number seems high. And it hasn’t risen much year-over-year. We were basically at this level of implied probability of default a year ago until the variant conga line end and about to unleash a lot of domestic demand,” he added. Still, JPMorgan said the Big Three had outperformed its discount airline index because of their international presence. Baker said last year’s domestic travel boom was slowing, with revenues falling into the low single digits year-over-year. Baker downgraded Southwest to Neutral as he expects more international carriers to outperform in the near term. — CNBC’s Michael Bloom contributed to this report.