The firm cut its price target on shares of the Dallas-based airline operator to $34 from $52.50.
Southwest Airlines hasn't adopted industry efforts to improve revenue by way of bag fees and fare increases, the firm wrote in a note cited by the Fly.
Labor uncertainty will likely persist in 2017 from all three unions, the firm added.
On Thursday the company reported 2016 second-quarter earnings and revenue that fell short of analysts' estimates.
Separately, TheStreet Ratings team rates the stock as a "buy" with a ratings score of B.
Southwest Airlines' strengths include its revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and good cash flow from operations.
You can view the full analysis from the report here: LUV
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.