American has been the year's best airline stock, but it's winning more backing on Wall Street with several analysts upgrading the stock after a relatively strong earnings report.

Seaport Global Securities' Daniel McKenzie upgraded American (ticker: AAL) stock to a Buy rating with a $27 target on Friday. While it's still early in the recovery, he wrote, "increased comfort" around corporate and trans-Atlantic revenue, combined with the carrier's plans to strengthen its balance sheet, are driving "increased conviction" in earnings for 2022.

American is expecting a robust recovery in domestic business revenue, McKenzie noted, and its international routes offer exposure to pent-up business demand in the U.K., Europe, and Brazil; American has a new code-sharing agreement with the Brazilian domestic carrier GOL Linhas Aereas Inteligentes (GOL).

American has cut labor and operating costs, partly by removing 157 planes from its fleet and improving operating efficiencies with only four major aircraft models. The carrier has also developed strategic partnerships with JetBlue Airways (JBLU) and Alaska Air (ALK), deals that could add $1 billion in 2022 revenue, McKenzie estimated.

The carrier could lift margins as well by winnowing its massive debt, including $36 billion of long-term debt and leasing liabilities on its balance sheet. American said this week that it aims to cut its debt by $15 billion over the next four years, taking a big chunk of liabilities off its books.

McKenzie estimated that American will post earnings per share of $3.50 in 2023, potentially hitting $4 to $4.50 if partnerships with JetBlue and Alaska pan out. At his target of $27, the stock would still trade at merely 6 times EPS of $3.50.

All that said, American's common equity is now worth just $14 billion—or 39% of its long-term debt. And there are no guarantees that American won't continue to dilute its shares, as it's done throughout the pandemic, as it aims to ramp up capacity and compete for more revenue in a recovery.

American's high-volume strategy could also run into headwinds if the demand climate doesn't cooperate.

New coronavirus cases are soaring, again with the Delta variant taking root in the U.S., Europe, and other regions. Australia and New Zealand has suspended their travel corridor, and the U.S. has yet to allow travel from Europe, Brazil, India, and China for noncitizens.

Airline stocks have been grounded for months, moreover, consolidating gains from late 2020 as vaccinations became widespread and travel demand started to rise. The sector is down 10% in the last three months against a 4.5% return for the S&P 500.

Nonetheless, analysts are raising earnings estimates across the sector after a slew of relatively upbeat earnings reports from carriers such as Delta Air Lines (DAL), United Airlines Holdings (UAL) and Southwest Airlines (LUV).

Along those lines, Cowen's Helane Becker raised her target on American to $23 while maintaining a Market Perform rating. Her 2023 EPS estimate is well below McKenzie's, at $2.55, though. At her $23 target, the stock would trade at 9 times earnings.

Bernstein analyst David Vernon also liked American's report, writing that, "if anything, the guidance is more bullish than we expected." He maintained an Outperform rating and $28 target.

JP Morgan's Jamie Baker also lifted estimates on American, though he's staying bearish. While he hiked his target to $17 from $14 and lifted his 2022 EPS target to $1.95 from $1.65, he maintained an Underweight rating.

"We do not believe the company's balance sheet strategy has been prudent, especially given the current turbulent environment, and we see better value elsewhere in our coverage," Baker wrote.

Betting against American has been the wrong call this year, though. The stock is up 35% this year, trouncing the 13.5% gain for the NYSE Arca Airline Index. In fact, no other airline stock has comes close—the next best performer has been Spirit Airlines (SAVE) at 14.3%.

Investors appear to have viewed American as a fixer-upper that's managed to renovate its house enough to compete as demand recovers. Whether the stock lives up to those expectations is the bet investors are making now.