Bank of America analysts downgraded shares of JetBlue Airways (NASDAQ:JBLU) to Underperform and double-upgraded United Airlines (UAL) to Buy in separate notes Tuesday.
Analysts said they lowered the JBLU rating as the current domestic environment remains difficult. JetBlue's price target was also cut to $3 from $6 per share.
"We expect the tough domestic airline industry backdrop we outlined in our Year Ahead report this morning, coupled with GTF engine issues that will pressure growth and costs in 2024 to continue to hurt the post-pandemic earnings recovery (2024 EBITDAR still 34% below 2019)," analysts wrote.
In addition, the bank thinks there is further execution risk as the market awaits the judge's ruling in JBLU's lawsuit with the DoJ with regards to purchasing SAVE.
United Airlines was lifted to Buy from Underperform, with a new price target of $56, up from $40 per share, as its valuation is now disconnected from its execution, according to BofA.
"We see a valuation disconnect vs UAL's execution and its more favorable leverage outlook than expected. While industry risks remain (see our Year Ahead report) and capex is above historical norms, UAL has outperformed the industry on revenues, can maintain about 2.5x leverage through this capex cycle, and trades at just 4.5x our 2024E EBITDAR towards the low-end of historical valuations," analysts stated.