Soleil finally noticed $130 oil today and downgraded the entire Airline sector from Outperform to NEUTRAL. The logic? You guessed it, high oil prices–which Soleil believes are causing liquidity concerns. Specifically, Soleil cut Continental, United and American.
- Continental (CAL) downgraded from Buy to HOLD (target to $17 from $30).
- UAL Corp. (UAUA) downgraded from Buy to SELL (target to $7 from $30). Soleil sees Chapter 11 in United’s future.
- AMR Corp. (AMR) downgraded from Hold to SELL (target to $3 from $9).
Lehman also has an increasingly pessimistic outlook. They believe valuatons are not compelling and cut estimates for the sector.
We, meanwhile, expect that the oil crisis will eventually trigger the usual wave of airline bankruptcies.
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