NEW YORK (TheStreet) -- Virgin America (VA)  stock is down 3.39% to $33.25 in early morning trading Wednesday after Credit Suisse initiated coverage of the airline with an "underperform" rating and a price target of $31. 

Analysts said they initiated coverage with an "underperform" rating because Virgin America has a concentrated network vulnerable to competitive capacity in key markets, a less attractive growth profile than other LCCs, and a narrowing cost advantage.

In addition, Credit Suisse said that the airline faces greater structural risks, including potential repeal of LGA perimeter rule, headwinds in Dallas Love Field, and concentrated private equity ownership.

"Virgin America's top 15 routes constitute 70% of capacity, making it more susceptible to competition, particularly on the transcontinental market," the firm noted, adding that the combination of a low fuel environment and increased competitive capacity in the airline's top markets places its revenue premium at greater risk.  

The airline's premium offering has attracted a loyal following in SFO and LAX since its inception in 2007, Credit Suisse said, adding that expansion is continuing in the second half of 2015 and the first half of 2016 with 10 new aircraft deliveries over 12 months, following a hiatus growth as the carrier focused on boosting profitability.  

However, analysts noted that growth also brings operational execution risks. 

"We see Virgin America as a relative laggard versus peers, as we favor airlines with more dominant networks that are returning cash to shareholders, or low-cost airlines with a significant cost advantage and broader growth opportunities," Credit Suisse said. 

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