UPDATE: J.P. Morgan Downgrades United Continental Holdings as Better Risk/Reward Opportunities Lie Elsewhere

In a report published Friday, J.P. Morgan analyst Jamie Baker downgraded the rating on

from Neutral to Underweight, and lowered the price target from $32.50 to $25.00. In the report, J.P. Morgan noted, “Cost convergence, fare unbundling, widespread consolidation, diminished new entrant activity, and return-oriented management teams have combined to form an industry that is actually managing itself for the first time we can recall. This stands in sharp contrast to the historical tendency to wage wars of attrition. As a result, we believe the US airline industry will continue to take steps to ensure profitability and continued balance sheet repair. As such, we recommend investors focus on airline stocks continuing to show meaningful de-leveraging and potentially poised to begin returning cash to shareholders. We believe UAL may do so over time, but has already been waived through by the market as if it has already occurred as evidenced by its premium multiple. Meanwhile, United is facing unique integration challenges that are resulting in relative margin deterioration while the industry's overall health continues to improve. Given still-challenging integration hurdles associated with Continental, higher-than-average capital expenditure plans, and aggressive consensus forecasts, we believe better risk/reward resides elsewhere; hence, we rate shares of UAL Underweight.” United Continental Holdings closed on Thursday at $31.30.