What happened

Airline shares have been strong performers in the weeks since news about progress toward a COVID-19 vaccine began to flow in, with the U.S. Global Jets ETF (NYSEMKT:JETS) up 35% since the beginning of November. Some on Wall Street are beginning to question whether the sector has moved too far, too fast, and that is causing the stocks to be under pressure on Friday.

Shares of American Airlines Group (NASDAQ:AAL) led the downward push, off by as much as 6.6% in midday trading, with shares of JetBlue Airways (NASDAQ:JBLU) off as much as 6.1%, and Spirit Airlines (NYSE:SAVE) shares off by 5.4%.

So what

Few sectors have been hit harder than airlines during the pandemic. Industrywide revenue is going to be down nearly 70% year over year, and the airlines continue to bleed millions daily as they try to run their networks with fewer passengers.

A ground worker guides an airplane to the terminal.

Image source: Getty Images.

A vaccine is a vital part of the bull case for the stocks, and the shares, some of which were off by more than 50% year to date earlier in the year, have been on the rise in recent weeks as a vaccine nears approval in the U.S.

Deutsche Bank analyst Michael Linenberg in a note Friday urged investors to temper that enthusiasm. U.S. airlines could see "the greatest demand recovery since World War II in 2021," he said, but given how long it will take for the airlines to get healthy again, the stocks look fairly valued after the recent climb higher.

Linenberg downgraded shares of American, JetBlue, and Spirit, along with Delta Air Lines (NYSE:DAL), Southwest Airlines (NYSE:LUV), United Airlines Holdings (NASDAQ:UAL), and Hawaiian Holdings (NASDAQ:HA) from buy to hold. The stocks are near fair value based on 2022 estimates, he argues, and in some cases, you have to look as far out as 2023 to justify the current trading levels.

Now what

The enthusiasm is understandable, but Linenberg's caution is wise. With the vaccine, the worst is most likely now behind us, and the risk of airline bankruptcies from here is remote. But the recovery will be slow, and the airlines -- which took on more than $50 billion in new debt to weather the crisis -- will need time to get healthy again.

For those with patience and a stomach to handle volatility, it's time to get choosy about airline stocks. Spirit is an intriguing choice right now because of its rock-bottom costs and focus on the leisure travelers that are likely to return before corporate travel. Spirit can make money on fare levels few can match, and that should help the airline heading into the 2021 summer vacation season.

Beyond that, I'd advise sticking to some of the best-run airlines with the wherewithal to either recover faster or meet any additional unexpected turbulence without getting off course. Southwest is already going on the offensive, and Delta offers a differentiated product and a best-in-class management team.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.