Good News for JetBlue Stock
As a low-cost airline, JetBlue Airways Corporation (NASDAQ:JBLU) benefits from low oil prices. On March 15, as crude prices fell almost two percent, losing their gains leading up to the Ides of March on oversupply concerns, JetBlue stock gained half a percentage point. Iran’s announcement that it would increase rather than cut production could put pressure on oil for the next few weeks—another potentially good sign for holders of JBLU stock.
The overall economy may want to see some more durable upward oil price moves, but for low-cost airlines, fuel cost savings are the one area they can rely on for savings. These airlines already operate on low margins; they have few other opportunities to save. JetBlue stock wins because the fuel savings combine with JetBlue’s revenue and earnings per share growth to deliver bullish potential.
For the past three years in a row, JetBlue has recorded a constant rise in revenue and earnings per share (EPS); the former has risen from $5.4 billion in 2013 to $6.4 billion in 2015, while EPS have increased from $0.52 to $1.98.
JBLU stock is trading at $20.18, but it shot past $27.00 just last September and has all the power it needs to return to that level this year. Analysts have $27.35 as the mean target, while more bullish analysts have set a price target for JetBlue stock of $32.00. (Source: “Stock Grabbing Investor’s Attention: JetBlue Airways Corporation (JBLU),” CWRU Observer, March 15, 2016.)
And when it comes to rivals, JetBlue has given the granddaddy of all low-cost airlines, Southwest, some tough competition. Jet Blue has increased its number of routes and even added a few cross-border services to Mexico and the Caribbean. (Source: “Southwest’s Long Beach Airport takeoff could spur fresh rivalry with JetBlue,” Los Angeles Times, February 23, 2016; http://www.latimes.com/business/la-fi-long-beach-airport-20160223-story.html.)
JetBlue is also expanding to Europe. On February 22, it launched a partnership with TAP Portugal to offer daily flights between Lisbon and the United States. The first involve flights from Boston to Lisbon starting June 11, and a few weeks later, it will launch flights between Lisbon and New York. (Source: “TAP Portugal to Link With JetBlue on Trans-Atlantic Flights,” The Wall Street Journal, February 22, 2016; http://www.wsj.com/articles/tap-portugal-to-link-with-jetblue-on-trans-atlantic-flights-1456155000.)
JetBlue can also count on small airports with convenient links. Long Beach, California near Los Angeles is one of these. It is an ideal and much more comfortable alternative to hectic LAX. Despite its size, Long Beach can become a major hub linking low-cost U.S. carrier traffic (including flights from Southwest, which does not have international destinations) with low-cost international traffic open routes out of Long Beach to Mexico.
JetBlue already serves several Caribbean and Latin American destinations and it will add Cuba and Fort Lauderdale to that list. These new destinations should help boost JetBlue stock’s revenue, given the high traffic potential. (Source: “JetBlue Submits Application for U.S.-Cuba Service,” Business Wire, March 2, 2016.)
In February, the U.S. and Cuba signed a deal to allow 20 daily scheduled flights between the two countries. Havana is the top destination, attracting the most interest.
JetBlue is confident about winning slots in the important market between Cuba and the U.S. The airline said that “JetBlue is the best airline and natural choice to be awarded frequencies for United States-Cuba service based upon the Department’s public interest and public benefit standards.” (Source: Ibid.)
JetBlue could begin service to Havana starting in September, being one of the first—if not the first—U.S.-based airline to do so. The Department of Transportation will confirm which airlines will get routes by this summer.
Until then, JetBlue (JBLU) stock may be one low-cost carrier to add to investors’ watch lists.