Should You Pick JetBlue Stock At $6 After Q4 Beat?

JetBlue (NASDAQ: JBLU) recently reported its Q4 results, with revenues and earnings above the consensus estimates. The company reported operating revenue of $2.33 billion, down 4% year over year but slightly above the $2.29 billion consensus estimate. Its adjusted loss of $0.19 per share was better than the street estimate of $0.28 loss per share. In this note, we discuss Delta’s stock performance, some key takeaways from its recent results, and its valuation.

JBLU stock has suffered a sharp decline of 60% from levels of $15 in early January 2021 to around $6 now, vs. an increase of about 30% for the S&P 500 over this roughly three-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 -14% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – 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, CAT, UNP, and GE, 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? From a valuation perspective, JBLU stock looks appropriately priced. We estimate JetBlue’s Valuation to be $5 per share, compared to its current market price of around $6. Our forecast is based on 0.2x sales for JetBlue, compared to its last eight-quarters average of 0.3x.

JetBlue’s revenue of $2.3 billion in Q4 reflected a 4% y-o-y decline, as a 3.3% rise in available seat miles was more than offset by a 7.5% fall in passenger revenue per available seat mile. The capacity is expected to remain lower in 2024. The company’s seven aircraft are out of operation due to engine inspections by Pratt & Whitney. JetBlue’s operating margin contracted 470 bps to -2.9% in Q4 amid higher costs. Lower revenues and margin resulted in the bottom line falling to a $0.19 loss per share versus profit per share of $0.22 in the prior-year quarter.

A federal judge recently barred JetBlue’s plan to acquire Spirit Airlines. JetBlue is likely to terminate the agreement with Spirit. The company also plans to defer buying new aircraft and likely focus on improving profitability. While JBLU stock may see higher levels over time, higher fuel prices and non-fuel costs, a challenging macroeconomic environment, and a likely decline in passenger yields are expected to weigh on JetBlue’s near-term performance.

While JBLU stock appears appropriately priced for now, 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] Returns as of 2/5/2024
[2] Cumulative total returns since the end of 2016

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