Is JetBlue Bullish or Bearish?

JetBlue Airways (NASDAQ:JBLU) is facing troubles because of the failed merger with Spirit Airlines, Inc. (NYSE:SAVE).

A federal judge put an end the $3.8 billion deal because the Justice Department had concerns over competition in the marketplace. Concerns were particularly high that Spirit’s cheap costs would become a thing of the past, and thereby hurt price-sensitive customers.

JetBlue’s Chief, Geraghty, realized it was increasingly improbable that the merger would receive a green light from authorities as opposition from the Department of Justice was unabating.

Other concerns stem from JetBlue’s decision to stop services in places like Kansas City and Newburgh in New York and also to greatly decrease the number of flights the company has at Los Angeles International Airport (LAX).

The company is dealing with increasing worries at this time, made worse because the airline has lost $2.2 billion since 2020. The failed merger along with regulatory problems have created a gloomy outlook for JetBlue’s shareholders.

What Do JetBlue’s Financials Reveal?

The CEO of JetBlue discussed how the company did better than forecast in the first quarter of FY 2024, with revenues landing above projections.

In spite of the solid results, financial conditions are still unstable with the company facing big losses and declines in its primary financial metrics.

In Q1 which ended on March 31, JetBlue experienced a fall in total operating revenues of 5.1% to $2.21 billion compared to last year’s same period. Operating losses expanded drastically by 197.1% from the previous year, amounting to $719 million.

Losses before income taxes also climbed by 188.3% from prior-year levels to $767 million. Additionally, the business revealed a significant rise in total loss and loss per common share. These figures reached $716 million and $2.11 per share contrasting to the prior year’s same period figures of $192 million and $0.58 per share respectively.

A further concern stemming from Q1’s results is that total debt increased to $5 billion compared with $4.72 billion as of December 31, 2023. 

How Is JetBlue’s Outlook?

JetBlue is expecting a 2% to 5% decrease in second-quarter capacity, compared with last year. The reduction mainly stems from continuing issues related to GTF engine problems.

Moreover, Blue cities have been closed down, and flight operations are being minimized in Los Angeles as well as certain low-performing intra-West Coast international markets.

Plus, JetBlue predicts that around 11 aircraft will be unavailable because of GTF problems, on average, during the second quarter and for the whole year.

These events together show a difficult situation for JetBlue, possibly leading to operational limitations in the short term.

Is JetBlue Profitable?

JetBlue is not profitable and lost $834 million over the past 12 months.

The company’s trailing-12-month gross profit margin is 25.34%, which falls behind the industry average by 17.9%.

The airline’s EBITDA margin is at 5.33%, much lower than what’s normal in this industry by 61.2%. This highlights that there are operational problems happening within JetBlue.

Cash problems are abound too with JetBlue’s trailing 12-month cash from operations is at $199 million, down 35.8% compared to the sector average that stands at $309.75 million.

In the same period, the company’s levered free cash flow margin is negative at 11.73%. This contrasts strongly with the industry average standing at a positive 6.72%, and suggests financial stability is in question and a possible lack of liquid resources in troubled times for JetBlue.

Is JetBlue Bullish or Bearish?

JetBlue errs on the bearish side now because it is operating a significant debt burden and is quickly burning through cash.

In a difficult operational environment, management is looking for other paths to grow and make money after several tough quarters. For the second quarter of 2024, forecasts are poor, with revenue expected to decrease by 8% against the year before at around $2.40 billion, while losses per share are estimated approximately at $0.20 per share.

For the entire fiscal year, which concludes in December 2024, it is predicted that revenue will reach $9.41 billion. This marks a decrease of 2.1% compared to last year and an anticipated loss per share amounting to $1.03.

Recently, the stock suffered a significant drop of almost 10% in a single month. Analysts forecast further declines lie on the horizon with the average price target set at around $6.05 per share.

From this perspective, being careful and waiting for a better chance to get into JetBlue might be wise. Analysts ratings reflect this careful attitude — 9 out of 12 believe investors should wait for a more suitable period to invest in the stock.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.