Some airlines are on the up thanks to post-pandemic travel boost, Delta says (DAL) Shares are up nearly 6% from last year, while others are the source of bankruptcy rumors, but JetBlue Airways (JBLU) It's been a dark horse in terms of investment.
After a federal judge blocked the airline from its plan to acquire low-cost competitor Spirit (SAVE) For $3.8 billion, JetBlue undertook a massive network overhaul that forced it to completely abandon markets like Kansas City and Newburgh, New York, and prioritize flights to sun-drenched destinations like Puerto Rico. The changes began to pay off, and by late July the airline posted a second-quarter profit of $25 million that sent its stock soaring in the near future.
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The good news continues now as Bank of America Securities analyst Andrew G. Didora has upgraded the airline's rating from “Underperform” to “Neutral,” while raising the price target from $3 to $6.
Should you invest in JetBlue stock? BoA analyst raises his target
The note sent to investors also said that now could be a good time to invest in airline stocks in general, as several are emerging from previous financial troubles with strategies to take advantage of increased travel demand, while fuel costs are also coming down from a high over the past year.
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“We believe now is a good time for investors to review the quality (of airline stocks),” BoA's investor note reads. Delta is also mentioned. (DAL) and United (UAL) like other airlines that are more likely to be solid investments.
In response to the improvement, JetBlue shares closed Monday, September 10, up 7%. The current price of $5.66 represents an increase of 9.79% from the same period last year and 7.50% from the start of 2024.
New York-based private equity firm Seaport Global had also previously expressed support for JetBlue stock by reaffirming its Buy rating and $7 price target, while TD Cowen currently has it at Hold and $5. The airline-focused US Global Jets ETF also saw a 3% boost following BoA’s note.
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JetBlue’s financial plans: “Create value and generate positive free cash flow”
In its plans to further boost profitability, JetBlue also announced it will reduce capacity by up to 6% in the third quarter and 5% for the year. Still, it expects third-quarter revenue and full-year sales to be 5.5% and 6% lower, respectively, than last year.
It also postpones the delivery of the 44 Airbus A321neo (EADSF) aircraft it planned to order from 2025 to at least 2030 to improve current cash flow; all the changes announced were welcomed by investors, who have much more confidence in the airline compared to the beginning of the year.
“We are preparing to restore our balance sheet to health and, in order to secure our financial future, we are announcing an incremental deferral of aircraft purchases for approximately $3 billion of planned capital expenditures,” JetBlue CFO Ursula Hurley said on a July 30 earnings call in which she explained the $25 million gain. “Going forward, we will focus on generating value from our existing asset base and ultimately generating positive free cash flow.”
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