JetBlue-Bryant Analysts Recommend BuyThe Bryant Analysts did a valuation of JetBlue's common stock, using its financial statements and current economic data to determine our buy rating on the company. Over the last three weeks JetBlue's stock price has appreciated 40.7%, from 3.59 on November 21, 2011 to $5.05 on December 9, 2011, due to news about American Airlines and their recent expansion in LaGuardia and Reagan airports.
Value of the Firm |
$6,818 |
Value of Long Term Debt |
$4,023 |
Unfunded Pension Liabilities, etc. |
$471 |
Minority Interest in Subsidiaries |
$0 |
Value of Preferred |
$0 |
Value of Common Equity |
$2,324 |
Shares outstanding in millions |
295 |
Price per share |
$7.89 |
The table above is a summary of the valuation we performed on JetBlue. According to our calculations, the company's net present value of future free cash flows, using a weighted average cost of capital (WACC) of 5.87%, is $6.8 billion. After subtracting the value of debt and the value of unfunded pension obligations, the portion of the companies' value owned by common shareholders is $2.3 billion. This gives us a projected share price of $7.89; significantly higher than the price JetBlue shares are trading at today. We believe that JetBlue is undervalued and should be purchased.
The recent spike in the stock price has been due to the failure of American Airlines, which filed for Chapter 11 bankruptcy on November 29th, and the announced acquisitions of slots in LaGuardia and Reagan National airport. These additions will allow JetBlue to double its already popular service at both airports in 2012. The airport slots are prized by carriers because each is popular with business fliers, who typically buy the most-expensive tickets. Because of this, JetBlue was immediately valued higher and the outlook for the firm brighter. We expect this positive trend to continue. With JetBlue's expansion, they are poised to capture some of the market share from American Airlines. JP Morgan projects American Airlines will lose 10% of its carrying capacity; translating to a 1-3% increase in revenue for its competitors, including JetBlue. They are picking the right time to expand because American Airlines was the second largest global airline in available seat miles and revenue passenger miles, and now stands to lose significant market share. This coupled with the positive valuation and the fact that JetBlue is already expanding strategically by purchasing slots at popular airports leads us to place a buy rating on the firm.
For our full analysis click the link below:
http://www.bryantanalysts.com/2011/12/12/buy-jetblue-2/
Written By: Chris Bekel & Joe Cunningham
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JetBlue-Bryant Analysts Recommend Buy
<p style="font-family: Georgia, 'Times New Roman', 'Bitstream Charter', Times, serif; font-size: 13px; line-height: 19px;">The Bryant Analysts did a valuation of JetBlue's common stock, using its financial statements and current economic data to determine our buy rating on the company. Over the last three weeks JetBlue's stock price has appreciated 40.7%, from 3.59 on November 21, 2011 to $5.05 on December 9, 2011, due to news about American Airlines and their recent expansion in LaGuardia and Reagan airports.
<table style="font-family: Georgia, 'Times New Roman', 'Bitstream Charter', Times, serif;" width="336" border="0" cellspacing="0" cellpadding="0">
<tbody>
<tr>
<td style="font-size: 11px;">Value of the Firm</td>
<td style="font-size: 11px;">$6,818</td>
</tr>
<tr>
<td style="font-size: 11px;">Value of Long Term Debt</td>
<td style="font-size: 11px;">$4,023</td>
</tr>
<tr>
<td style="font-size: 11px;">Unfunded Pension Liabilities, etc.</td>
<td style="font-size: 11px;">$471</td>
</tr>
<tr>
<td style="font-size: 11px;">Minority Interest in Subsidiaries</td>
<td style="font-size: 11px;">$0</td>
</tr>
<tr>
<td style="font-size: 11px;">Value of Preferred</td>
<td style="font-size: 11px;">$0</td>
</tr>
<tr>
<td style="font-size: 11px;">Value of Common Equity</td>
<td style="font-size: 11px;">$2,324</td>
</tr>
<tr>
<td style="font-size: 11px;">Shares outstanding in millions</td>
<td style="font-size: 11px;">295</td>
</tr>
<tr>
<td style="font-size: 11px;">Price per share</td>
<td style="font-size: 11px;">$7.89</td>
</tr>
</tbody>
</table>
<p style="font-family: Georgia, 'Times New Roman', 'Bitstream Charter', Times, serif; font-size: 13px; line-height: 19px;">The table above is a summary of the valuation we performed on JetBlue. According to our calculations, the company's net present value of future free cash flows, using a weighted average cost of capital (WACC) of 5.87%, is $6.8 billion. After subtracting the value of debt and the value of unfunded pension obligations, the portion of the companies' value owned by common shareholders is $2.3 billion. This gives us a projected share price of $7.89; significantly higher than the price JetBlue shares are trading at today. We believe that JetBlue is undervalued and should be purchased.
<p style="font-family: Georgia, 'Times New Roman', 'Bitstream Charter', Times, serif; font-size: 13px; line-height: 19px;">The recent spike in the stock price has been due to the failure of American Airlines, which filed for Chapter 11 bankruptcy on November 29<sup>th</sup>, and the announced acquisitions of slots in LaGuardia and Reagan National airport. These additions will allow JetBlue to double its already popular service at both airports in 2012. The airport slots are prized by carriers because each is popular with business fliers, who typically buy the most-expensive tickets. Because of this, JetBlue was immediately valued higher and the outlook for the firm brighter. We expect this positive trend to continue. With JetBlue's expansion, they are poised to capture some of the market share from American Airlines. JP Morgan projects American Airlines will lose 10% of its carrying capacity; translating to a 1-3% increase in revenue for its competitors, including JetBlue. They are picking the right time to expand because American Airlines was the second largest global airline in available seat miles and revenue passenger miles, and now stands to lose significant market share. This coupled with the positive valuation and the fact that JetBlue is already expanding strategically by purchasing slots at popular airports leads us to place a buy rating on the firm.
<p style="font-family: Georgia, 'Times New Roman', 'Bitstream Charter', Times, serif; font-size: 13px; line-height: 19px;">For our full analysis click the link below:
http://www.bryantanalysts.com/2011/12/12/buy-jetblue-2/
<p style="font-family: Georgia, 'Times New Roman', 'Bitstream Charter', Times, serif; font-size: 13px; line-height: 19px;">Written By: Chris Bekel & Joe Cunningham
