JPMorgan Is Ditching This Airline Stock

An analyst said the stock will be grounded until margins improve

Southwest Airlines Co (NYSE:LUV) is trading up 0.4% at $48.10, despite J.P. Morgan Securities downgrading the stock to "underweight" from "neutral" and cutting its price target to $52 from $63. In the firm's note, it mentioned the shares will be stalled until the company improves its margins.

LUV has been stuck in a recent sell-off, with the equity gapping 8.6% lower after a disappointing earnings release last week. The shares initially fell lower out of the gate this morning, threatening their 52-week low of $47.10 that was touched yesterday. Overall, the stock is down roughly 27% in 2018.

There's still a lot of bullish sentiment surrounding the airline, however. Most notably, 15 of the 18 brokerage firms in coverage have "strong buy" or "buy" ratings right now, and the average 12-month price target is all the way up at $64.29. It's worth noting that this price point swiftly rejected Southwest Airlines stock in late September. This setup makes the security vulnerable to more downgrades going forward.

Elsewhere, options traders keep targeting calls. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows 2.71 calls were bought to open during the past 10 days for every put. Meanwhile, calls account for eight of the 10 top open interest positions, with traders showing particular interest in the January 2019 series.