What’s Next For JetBlue Stock After A 35% Fall This Year?

After a 35% fall this year, JetBlue Airways stock (NASDAQ: JBLU) looks like it can see higher levels. Looking at a slightly longer term, JBLU stock is down a significant 78% from levels seen in late 2019. This can be attributed to 1. the company’s P/S ratio, which plunged 78% to 0.1x trailing revenues from 0.7x in 2019, 2. its average shares outstanding rising 16% to 333 million, partly offset by 3. a 20% rise in JetBlue Airways revenue to $9.7 billion. Our interactive dashboard, Why JetBlue Airways Stock Moved, has more details.

JBLU stock has suffered a sharp decline of 75% from levels of $15 in early January 2021 to around $4 now, vs. an increase of about 20% for the S&P 500 over this roughly 3-year period. Notably, JBLU stock has underperformed the broader market in each of the last 3 years. Returns for the stock were -2% in 2021, -54% in 2022, and -35% in 2023 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 19% in 2023 (YTD) – indicating that JBLU underperformed the S&P in 2021, 2022, and 2023.

In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Industrials sector including UNP, BA, and UPS, and even for the megacap stars GOOG, TSLA, and MSFT.
In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could JBLU face a similar situation as it did in 2021, 2022, and 2023 and underperform the S&P over the next 12 months – or will it see a recovery? Going by its valuation, JBLU appears to have ample room for growth, as discussed below.

JetBlue primarily earns its revenues from commercial flight operations and other ancillary services such as freight and mail. The rise in revenues over the recent years can be attributed to a rebound in air travel demand, with passenger traffic and ticket yield rising meaningfully in the last few years. JetBlue’s available seat miles (ASM) plunged from 63.8 million in 2019 to 32.7 million in 2020 before rebounding to 68.0 million in the last twelve month period. The company’s passenger revenue per average seat mile (PRASM) fell from 12.20 cents in 2019 to 8.36 cents in 2020 before rebounding to 13.29 now. The demand for air travel is expected to remain high in the near term, boding well for JetBlue in the near future. However, the average ticket price has also cooled this year while overall capacity has expanded. The PRASM stood at 14.89 cents in Q3’23, reflecting a 14% y-o-y decline.  JetBlue’s operating margin stood at 9.5% in 2019, before the pandemic, and it fell to -63.2% in 2020 before recovering to -4.6% in 2022. Our JetBlue Airways (JBLU) Operating Income Comparison dashboard has more details.

Looking at valuation, we find that JBLU stock has more room for growth. We estimate JetBlue Airways’ Valuation to be $5 per share, about 20% above the current market price. JetBlue stock has been weighed down over the last year or so owing to concerns around its proposed acquisition of Spirit Airlines. JetBlue and Spirit agreed to merge last year in a $3.8 billion deal. However, earlier this year, the Justice Department filed a lawsuit seeking to block the proposed merger of JetBlue and Spirit, stating that it will lead to increased fares. ^[1]

While JBLU stock appears to have more room for growth, it is helpful to see how JetBlue Airways’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Month-to-date and year-to-date as of 11/22/2023
[2] Cumulative total returns since the end of 2016

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1. Justice Department Sues to Block JetBlue From Buying Spirit Airlines, Dave Michaels and Andrew Tangel, The Wall Street Journal, Mar 7, 2023 [↩]