JetBlue Stock: Should You Buy The Dip?

-9.28%
Downside
7.97
Market
7.23
Trefis
JBLU: JetBlue Airways logo
JBLU
JetBlue Airways

With new travel rules imposed in the U.S. and across the world due to the Omicron variant, international travel demand is expected to remain low for a couple of months. After reaching pre-Covid levels in the second quarter, the shares of JetBlue Airways (NASDAQ: JBLU) declined in July due to rising fuel prices and the fourth wave of the pandemic. Currently, the passenger numbers at TSA checkpoints remain just 10% below the levels observed in 2019 – indicating continued demand for air travel despite ongoing travel restrictions. Notably, JBLU stock has lost $2.2 billion in market capitalization since February 2020 despite burning just $683 million of operating cash over the period. Also, the domestic business contributes almost 70% of JetBlue’s revenues and is likely to support earnings amid the ongoing international travel restrictions. Considering the negative impact of the Omicron variant for a quarter, Trefis believes that there is a sizable upside in JetBlue Airways stock. We highlight the historical trends in revenues, earnings, and stock price in an interactive dashboard analysis on JetBlue Valuation.

How did JetBlue Airways perform in the third quarter?

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In Q3 2021, JetBlue Airways reported just 5% contraction in net revenues and a 0.8% reduction in capacity (available seat miles) over Q3 2019 – highlighting the complete recovery in passenger demand. The company earned $130 million of net income and $1.7 billion of cash from operations – assisting $770 million of capital spending and $737 million of debt retirements. On the operational side, occupancy rate almost reached pre-Covid levels of 79.9%, propelled by domestic demand and efficient capacity utilization.

A quick look at JetBlue’s historical performance

JetBlue Airways’ revenues increased by 15% from $7 billion in 2017 to $8.1 billion in 2019, assisted by capacity growth and rising ticket prices. In 2020, the company’s top line observed a 64% (y-o-y) contraction as air traffic demand plummeted and cost control measures were implemented. Moreover, the company’s net margins deteriorated from higher fuel expenses and administrative costs. Thus, the EPS decreased by 45% from $3.47 in 2017 to $1.92 in 2019, and ($4.88) in 2020. (related: Will Domestic Travel Demand Assist United Airlines Stock?)

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 Returns Dec 2021
MTD [1]
2021
YTD [1]
2017-21
Total [2]
 JBLU Return -5% -2% -36%
 S&P 500 Return -2% 22% 105%
 Trefis MS Portfolio Return -2% 41% 281%

[1] Month-to-date and year-to-date as of 12/7/2021
[2] Cumulative total returns since 2017

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