Investing.com -- JPMorgan downgraded Southwest Airlines (NYSE: LUV ) to Underweight from Neutral on its surging valuation premium, but the brokerage maintained its $25 year-end price target.

While acknowledging activist investor Elliott Investment Management’s involvement, JPMorgan expressed skepticism over Southwest’s ability to reclaim its historical margin and return on invested capital (ROIC) leadership.

The firm noted that Southwest trades at a significant premium, 15x and 13x forecasted 2025 and 2026 EPS, respectively, far exceeding its airline peers.

JPMorgan also questioned who, beyond Elliott, would be a strong incremental buyer of the stock.

Since Elliott’s involvement, Southwest shares have gained only 10%, compared to a 74% rise in United Airlines (UAL) and a flat performance relative to the S&P 500 .

“Our forecast for Southwest hasn’t changed, but given the combination of its surging valuation premium and our desire to rebalance our ratings following the addition of Sun Country, we are reducing our Neutral rating to Underweight,” analyst at JP Morgan said.