What happened

Azul (AZUL 1.24%) has held up pretty well through the pandemic compared to many of its Latin American rivals, with the Brazilian airline managing to avoid bankruptcy and in recent months rebounding off of its lows. At least one analyst believes the rally has gone about as far as it can, putting pressure on the shares on Tuesday.

Azul stock is down 7.3% as of 3:55 p.m. EDT.

So what

Azul and other airlines have seen demand plummet due to the pandemic, but the company has the benefit of support from its government and a strong enough balance sheet that it might not even need the help.

The airline's shares are up 66% from mid-March lows on investor optimism Azul can avoid a bankruptcy filing. But conditions are still miserable for airlines, and on Tuesday Bradesco BBI analyst Victor Mizusaki downgraded the shares because he sees little additional upside after those gains.

A plane landing at night.

Image source: Getty Images.

Azul continues to fly through turbulence. According to International Air Transport Association (IATA) data released Tuesday, Latin American airlines saw demand drop 93.4% in August compared to the same month of 2019. Domestic Brazil airline revenue was down 67% year over year in August.

Now what

Mizusaki moved his rating on Azul from an outperform to a neutral. Given the stock's strong push higher, that is probably accurate for the time being. We are still years away from a full recovery, and given the importance of international travel to Latin American airlines it could take longer for that region's carriers to recover.

That said, even after that rally higher shares of Azul remain down nearly 70% for the year. For those with a long enough time horizon and the ability to filter out the day-to-day headlines, Azul appears to be a top choice for investors among Latin American airlines.