Southwest Airlines (NYSE: LUV) shares edged lower by 1.8% on Thursday after Bernstein analysts downgraded the airline, saying that investors are too optimistic regarding the return of Boeing’s (NYSE: BA) 737 MAX planes.
Bernstein analyst David Vernon cut his rating on the stock to “market perform” and issued a new stock price target of USD 61 per share.
The Boeing 737 MAX aircrafts were grounded following the two deadly crashes in the past year. Moreover, reports surfaced this month that Boeing may have had knowledge about the problems with the anti-stall system linked to the two crashes.
"While this thesis seems plausible and will likely be how things will eventually play out, we think the market is pricing in all the good news on the return of the MAX and not appreciating how disruptive its return could be on either the unit revenue or cost fronts," Vernon wrote in a note to clients.
The concerns over the 737 MAX returns led many analysts to downgrade their coverage on Boeing’s stock.
Credit Suisse analysts downgraded the stock to “hold” from a “buy” rating earlier this month. Additionally, the firm also slashed its price target from USD 416 to USD 323 per share.
Previously, Credit Suisse analysts maintained a “buy” rating on the stock hoping that Boeing would resolve the 737 MAX issues, however, following the report of Boeing’s knowledge, the analysts said they can no longer defend the Company.
Bank of America analysts maintained a “hold” rating on the stock, but cut the target price from USD 400 to USD 370 per share. Meanwhile, UBS analysts cut their rating from a “buy” to a “neutral” rating and slashed its price target from USD 470 per share to USD 375 per share.