Some airlines are flying high from the post-pandemic boost in travel — Delta (DAL) shares are up by nearly 6% from last year — while others are the source of bankruptcy rumors, but JetBlue Airways (JBLU) has been a bit of a dark horse in terms of investment.
After a federal judge blocked the carrier in its plan to acquire low-cost competitor Spirit (SAVE) for $3.8 billon, JetBlue undertook a massive network shake-up that had it leave markets like Kansas City and Newburgh, New York entirely and prioritize flights to sun-seeking destinations like Puerto Rico. The changes started paying off and, at the end of July, the airline posted a second-quarter profit of $25 million that sent its stock soaring on the short-term.
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The good news continues now that Bank of America Securities analyst Andrew G. Didora upgraded the airline from "Underperform" to "Neutral," while also raising the price target to $6 from $3.
Should you invest in JetBlue shares? BoA analyst raises 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 coming out of earlier financial problems with strategies to tap into increased travel demand while fuel costs are also coming down from a high over the last year.
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"We believe now is a good time for investors to revisit quality [of airline stocks]," the BoA investor note reads. It also mentions Delta (DAL) and United (UAL) as other airlines that are most likely to be sound investments.
In response to the upgrade, JetBlue shares finished Monday, Sept. 10 7% higher. The current price of $5.66 is a 9.79% increase from the same time a year ago and 7.50% higher from the start of 2024.
New York-based private investment firm Seaport Global had earlier also expressed its 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 U.S. Global Jets ETF also saw a brig boost of 3% upon the BoA note.
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JetBlue's financial plans: 'Driving value and generating positive cash free flow'
In its plans to further increase profitability, JetBlue has also earlier announced that it will cut capacity by up to 6% in the third quarter and 5% for the year. It still expects third-quarter revenue and full-year sales to be a respective 5.5% and 6% lower from last year.
It is also deferring the delivery of the 44 Airbus A321neo (EADSF) planes it planned to order from 2025 until at least 2030 to improve current cash flow; all the announced changes were received well by investors who are becoming much more confident in the airline compared to the start of the year.
"We are setting ourselves on a path to restore our balance sheet health, and in support of securing our financial future, we are announcing an incremental aircraft deferral of approximately $3 billion of planned capital expenditures," JetBlue Chief Financial Officer Ursula Hurley said in a July 30 earnings call that explained the $25 million profit. "Our focus going forward will be on driving value from our existing asset base and, ultimately, generating positive free cash flow."
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