JetBlue Airways (NASDAQ:JBLU) was cut to Underweight from In Line at Evercore ISI on Tuesday, with an $8 per share price target.
Analysts told investors in a note that the downgrade follows a 37% rally in JBLU shares over the last month despite the "obviously negative fundamental outcome" from the Northeast Alliance (NEA) ruling. JetBlue shares are down over 2% so far in Tuesday's session.
A federal judge concurred with government regulators in May that the Northeast Alliance between JetBlue and American Airlines (NASDAQ:AAL) breached antitrust law as it reduced competition and resulted in increased fares.
With JetBlue now focused on its acquisition of Spirit (NYSE:SAVE), analysts said that while there will be twists and turns along the way, they "believe the Spirit acquisition ultimately gets done while the premium JBLU is paying for Spirit continues to expand (as SAVE fundamentals continue to moderate)."
"JBLU balance sheet is on a journey from average to worst (from 2x to 5x Net Debt to EBITDA pro-forma vs. low-cost mean of 1.2x)," the analysts wrote. "Integration is complex while company’s execution track record as a standalone is mixed. Furthermore, while lower probability, there are NEA wind-down scenarios that could be highly disruptive to JetBlue’s 2H capacity planning and cost execution."