According to TheFly, the BofA analyst said both airlines trade at the high end of historical valuation ranges despite less exposure to “the strongest industry trends.”
JetBlue (JBLU) and Southwest Airlines (LUV) edged lower on Friday after BofA Global Research downgraded both stocks to ‘Underperform’ from ‘Neutral’.
According to TheFly, the BofA analyst said both airlines trade at the high end of historical valuation ranges despite less exposure to “the strongest industry trends.”
The note further elaborated that Jetblue and Southwest Airlines have less exposure to corporate, premium, and international routes, which have been the primary drivers of airline earnings after the pandemic.
The analyst said that both companies are also exposed to execution risk as Southwest expands its product offering and JetBlue continues to fine-tune its network, according to TheFly.
BofA cut the price target of Southwest to $31 from $33, which implies a 3.6% downside to the stock’s last close.
Southwest has been going through a tumultuous time as CEO Bob Jordan reportedly told his staff that the company was halting corporate hiring and promotions, suspending most summer internships, and doing away with some employee team-building events to reduce costs and better margins.
On Wednesday, the Department of Transportation announced a lawsuit against Southwest Airlines for illegally operating multiple chronically delayed flights and disrupting passengers’ travel.
JetBlue is also attempting to move away from a failed deal to buy Spirit Airlines.
Retail sentiment on the stock moved further into the ‘bearish’ (30/100) territory while retail chatter was normal.
JBLU’s Sentiment Meter and Message Volume as of 01:34 p.m. ET on Jan. 17, 2025 | Source: Stocktwits
Retail sentiment on Southwest improved but remained in the ‘bearish’ (38/100) zone from ‘extremely bearish’(19/100) a day ago, following another Citi downgrade.
LUV’s Sentiment Meter and Message Volume as of 01:36 p.m. ET on Jan. 17, 2025 | Source: Stocktwits
Over the past year, JBLU has gained 61% while LUV has risen 14%.
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