Shares of JetBlue (JBLU) have been on a downward trajectory since the recent announcement of results for Q3 and an updated outlook for FY24. While the airline’s losses have narrowed compared to the previous year, and slight improvements in revenue have been recorded, a forecasted drop of 4% to 5% in full-year revenue has derailed some investors’ optimism. Further, the 4.8% year-over-year increase in operating expenses (excluding fuel, other non-airline operating expenses, and special items) for the third quarter of 2024 is a concern.
The stock has been down over 13.5% in the past few days. Investors might want to hold off until the company articulates a more optimistic outlook or shows more promising results.
JetBlue Reports Operational Progress
JetBlue Airways offers air transportation services across various destinations, reaching 100 locations throughout the U.S., Canada, the Caribbean, Latin America, and Europe. It operates various aircraft models, including Airbus A321, A220, A321neo, and Embraer E190.
The company has reported improvements across critical operational parameters. It has seen a rise in ticket sales, including robust demand in peak periods, an increase in last-minute bookings, and moderate success in the Latin region. This has helped the company make substantial progress toward the 2024 revenue target of $300 million. JetBlue has also executed effective cost initiatives that resulted in structural cost program savings of $169 million and avoided fleet modernization costs of $95 million.
In another significant development, the airline has partnered with World Fuel Services and Valero Energy Corporation (VLO) to introduce an ongoing supply of blended sustainable aviation fuel in New York. The initial delivery is planned for 2024.
JetBlue’s Recent Financial Results
The company has reported its third-quarter financial results for 2024. Revenue of $2.4 billion rose 2.1% year-over-year while surpassing analysts’ projections by $50 million. Despite a decrease in system capacity of 3.6% compared to the same period last year, operating revenue increased by 0.5%. The operating margin improved by five points, rising to -1.6%, while operating expenses totaled $2.4 billion, a 4.2% year-on-year decrease.
The operating expense per available seat mile (CASM) was reduced by 0.7%. However, the CASM, excluding fuel, other non-airline operating expenses, and special items, increased by 4.8% year-over-year. After adjusting for specific items, the airline reported a net loss of $54 million, or a $0.16 loss per share, outperforming analysts’ predictions by $0.05.
Following its third-quarter report, JBLU’s management has issued forward guidance for Q4 2024 and FY 2024, revealing an estimated decrease in available seat miles (ASMs) and year-over-year revenue, with an anticipated increase in CASM ex-fuel. By 2025, the firm is optimistic about the prospects of revenue performance improvement, particularly with implementing new “JetForward” initiatives.
What Is the Price Target for JBLU Stock?
The airline has struggled with recovery post-COVID, and the stock is down 68% over the past five years. However, the past year has seen some rebound, and the stock has been up over 9% year-to-date. It trades near the middle of its 52-week price range of $3.42 – $8.07, though it shows negative price momentum by trading below its 20-day (6.92) and 50-day (6.46) moving averages. The P/S ratio of 0.22x suggests a relative discount to the Airline industry average of 0.5x.
Analysts following the company have taken a cautious stance on the stock. For instance, TD Cowen analyst Helane Becker, a five-star analyst according to Tipranks’ ratings, recently reiterated a Hold rating on the shares with a price target of $6.00, noting improvement in Q3 results but disappointing Q4 guidance, suggesting the airline’s future performance remains uncertain amid ongoing challenges.
Based on seven analysts’ recent recommendations, JetBlue Airways is rated a Hold overall. The average price target for JBLU stock is $6.25, representing a potential upside of 6.66.% % from current levels.
Bottom Line on JetBlue
JetBlue has seen its shares tumble despite narrowing its losses and making incremental revenue gains despite a projected dip in full-year revenue and increased operating expenses. While Q3’s revenue rise beat analysts’ expectations, the forecast for Q4 2024 and FY 2024 paints a somewhat uncertain picture. The company’s future hinges on the success of its new initiatives and how it handles persisting industry challenges. Investors may want to wait for sustained positive results before entertaining the stock.
