Susquehanna made some strategic ratings changes ahead of the earnings season for the airline sector on concerns about the macro backdrop and what could be a potential clearings event when FY22-FY23 guidance is updated.
Analyst Christopher Stathoulopoulos: "While we’ve yet to find any cracks in airline booking data, we believe that at some point consumers will have to contend with the economic reality of higher air fares, outsized general inflation, and potential layoffs in select industries (e.g., finance, tech, and media) into 2023."
The sweep of price target cuts included American Airlines Group (AAL) to $15 from $19, Allegiant Travel (ALGT) to $140 from $185, Alaska Air Group (ALK) to $50 from $68, Delta Air Lines (DAL) to $35 from $47, Hawaiian Holdings (HA) to $16 from $17, Sun Country Airlines (SNCY) to $23 from $30, United Airlines (UAL) to $43 from $60, and Frontier Group (ULCC) to $13 from $15.
The rating on JetBlue Airways (JBLU) was also dropped to Neutral from Buy, mainly on concerns about the impact of a potential Spirit Airlines (SAVE) acquisition.
The outlier in the group is Southwest Airlines (NYSE:LUV), which was upgraded by the firm to a Positive rating from Neutral with various revenue initiatives and the break into corporate travel seen supporting share price. LUV is also seen having ample liquidity to ride out a downturn.
Shares of LUV rose 0.92% premarket to $37.17.
Sector watch: Read about American Airlines' guidance for Q2.