Jet Blue is a Hot bargain Right Now!
John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
JetBlue (NASDAQ: JBLU), unlike some of its competitors, is a domestic airline. This gives it an advantage when we consider the turmoil around the world right now. International carriers are feeling the affects. With fuel prices falling, this may be a good time to look into the company for a long term investment. And I am not the only one who thinks so.
UBS raised JetBlue Airways from Neutral to Buy, its price target raised from $6 to $8. It is understandable that the price of the stock would go down on the rising fuel prices, but it has reversed and prices are now coming down. Since North America has had the strongest economy and Jet Blue is not mainly exposed to the international troubled economies, shares should improve. UBS raises FY12 EPS estimate from $0.55 to $0.64 and FY13 from $0.71 to $0.84.
While USB raised its price target, there also was insider buying. Back on May 18, JetBlue Airways Corp’s Director, Peter Boneparth, invested $210,000.00 into 50,000 shares of JBLU, for a cost per share of $4.20. If you are an investor looking for a bargain, pay attention! Why would an insider spend that kind of money on the stock? Unless he is nuts—I believe he thinks he can make some money.
Like the other airlines, JetBlue was facing pressure through sustained momentum caused by high fuel prices within the industry. Because of this, the company was focusing on diversifying its revenue during periods like this while aggressively managing its costs. And being domestic, it is not challenged like some of the other airlines around the world.
Other airlines have been hurt by international markets slumping on account of the economic turmoil. International Airlines Group, formed by the merger of British Airways and Iberia, said first quarter losses more than doubled as higher fuel costs and weakness in Spain undermined strength in premium long-haul travel out of London. The first weeks of June 2011 and June 2012, American Airlines (NYSE: AA) has cut its international seat capacity by around 6% among the top 15 country markets. Delta (NYSE: DAL) will cut another 5 percent of trans-Atlantic flight capacity due to the weakened euro and the risk of fuel price spikes, according to Bastian. The airline will also cut another 1 to 2 percent of flight capacity in the Pacific region. These are three examples of struggles other airlines are facing that JetBlue has not had to deal with.
But JetBlue continues to grow slowly. Boston and the Caribbean are the places the airline has seen the most growth as of late. Boston has nonstop service to 42 destinations and this should continue to grow while it is also opening its fifth destination in the Dominican Republic—the Caribbean. Presently known as a domestic carrier, there are—in the works, plans for Aer Lingus Group to sell a 25% stack to Jet Blue. This will start to give it an international presence.
The airline industry as a whole is projected to grow in the next couple years as air travel continues to grow in popularity. JetBlue looks like a stock to get into right now. With the projections for the future and the protection the stock has against international markets (so far) this stock looks like abargain.
The Motley Fool has no positions in the stocks mentioned above. johnmylant has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
