Southwest Airlines (NYSE:LUV) shares fell as much as 9% yesterday following the company’s second-quarter earnings release.
The main reason behind the selloff is heightened investor concerns about a worse-than-expected full-year costs outlook.
As a result, at least three Wall Street analysts downgraded LUV stock today. Raymond James analysts moved to Outperform from Strong Buy with a price target of $40 per share.
“Our view that Southwest was done negatively surprising on CASM-Ex was incorrect, this time driven by additional market wage rate accruals (a greater impact than we anticipated). Moreover, while we believe the schedule revamp to reflect post-pandemic changes in travel patterns is the right move, the benefits will not be evident for another ~six months,” they said in a note.
“Hence, we find ourselves pushing out the recovery to 2019 level profitability from 2024 to 2025 until we gain greater conviction in the effectiveness of various initiatives.”
Similarly, Deutsche Bank analysts cut to Hold from Buy citing “earnings forecast cut and limited share price upside as the company optimizes its post-COVID network.”
The price target is lowered to $38 per share.
BofA analysts downgraded LUV shares yesterday.
The stock trades a further 0.6% down in early Friday trading.