Does JetBlue Airways Corporation (NASDAQ:JBLU) Have Potential for A Rally?

JetBlue Airways Corporation (NASDAQ:JBLU) is currently trading at a discount as compared to its competitors even as investors remain cautious towards the airline in the aftermath of the recent hurricanes. Most investors are worried about the airline’s huge exposure to Florida and the Caribbean given that travel to these two regions was adversely affected by the impact of hurricanes Irma and Harvey.  

Article Summary

JetBlue stock is trading at a discount due to the recent hurricanes.

The airline has strong financials and opportunities that could fuel its recovery.

The airline is on a recovery path in the aftermath of the hurricanes.

Here’s the trading report on JBLU.

The two hurricanes resulted in massive flight cancellations, which could affect JetBlue’s third quarter results in a big way. However, it is important to note that the impact of the two hurricanes on JetBlue’s bottom line is quite temporary given that the company has returned to normal operations.

Many investors are cautious towards JetBlue, which has affected its stock price negatively, despite the airline’s strong financials and existing growth opportunities. The airline reported the highest pre-tax margin among its competitors in the last quarter and also reported that it had already achieved $45 million of its 2020 savings target.

JetBlue is the airline with the youngest fleet of airplanes as compared to many of its competitors such as and Delta Air Lines, Inc. (NYSE:DAL) and United Continental Holdings Inc (NYSE:UAL). Some of the airline’s competitors such as Southwest Airlines Co (NYSE:LUV) are in the process of upgrading their fleets, which is a capital intensive endeavor.

A major risk facing JetBlue relates to the fact that approximately 80% of its passengers are leisure travelers, which means that if vacation travel to Florida and the Caribbean remains depressed, the airline might post further losses.

The airline’s stock price is currently on a corrective decline given that the airline was on a major uptrend from March 2009 up to September 2015. It was inevitable that the stock would reverse before resuming its long-term rally. This means that the airline’s stock price might have bottomed due to the hurricanes’ impact and might be gearing up for another rally.

The extent of the hurricanes’ impact on the airline’s current and future financial position is yet to be known, but it seems like the markets have already priced-in majority of the hurricanes’ negative impact. The company is set to report its third quarter results on October 24, which will reveal the full impact of the two storms on the company’s bottom line.

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