Shares of Hawaiian Holdings, Inc. (NASDAQ:HA) opened more than 7% lower on Wednesday, and continued to fall, down about 11% in morning-trading after the release of an analyst note.
Analyst Joseph DeNardi of Stifel Financial Corp. downgraded HA to a “sell” rating with a 12-month target price of $40, down from a "hold" rating and a $60 price target.
This downgrade follows news that United Airlines (NYSE:UAL) will be offering more flights to Hawaii. They will send more flights from Chicago, Denver, Los Angeles and San Francisco. United stated that this change will give it “the most flights between the mainland and the Hawaiian Islands than any other carrier.”
Besides increasing its services on 11 routes, United Airlines is also changing their service quality. The airline says lie-flat seats will be added to four routes, including Hawaii to Denver, as they try to compete with rival airlines who have already added such seats to overnight flights.
DeNardi cited this move by United Airlines for HA’s downgrade. He told investors in a research note that competitive capacity is “finally coming.” The analyst said that United’s announcement shifts Hawaiian’s competitive capacity outlook as United increases their capacity by 20% next year.
HA remains a Zacks Rank #2 (Buy). Our current consensus estimates suggest that the company still has positive EPS and sales growth for the current quarter. The competition is increasing for Hawaiian Airlines, but the company’s stock still has strength.
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