Why JetBlue Shares Could Fly Over 40% Higher

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JetBlue Airways Corp. (NASDAQ: JBLU) is ready to take off for investors. That’s the message from Tuesday’s top analyst upgrades. Citigroup raised JetBlue to Buy from Neutral and the price target to $26 from $19.50.

If Citi analyst Kevin Crissey is correct, that’s an implied upside potential of about 42% from the prior day’s $18.25 closing price. As a reminder, most S&P 500 and Dow Jones industrial average analyst calls with new Buy or Outperform ratings come with upside of 8% to 10% at this stage of the 10-year old bull market. Upside calls of 15% to 20% are high, even for some of the more speculative stocks.

Crissey sees several drivers for the discount and regional airline. In the short term, favorable seat pricing trends and lower fuel prices should boost profitability and per-seat metrics. Earnings estimates are expected to climb as a result of the large drop in fuel prices and from healthier unit (per seat) revenue trajectory.

The upgrade also noted that consensus earnings forecasts look too low for fiscal year 2020, particularly as fuel prices have come down substantially from when JetBlue last gave financial guidance for profitability.

Crissey noted that revenue per available seat mile can even be weak (and maybe even negative) and JetBlue could still beat its consensus earnings estimates. Analysts are projecting roughly $2.30 in earnings per share for 2020, while the company target is $2.50 to $3.00 per share.

The upgrade also sees room for the company to improve its historical and longer-term trends of being below average at controlling its unit per seat costs and that JetBlue may be able to show flattening or even declining costs over a multiyear period, similar to how Alaska Air did.

Shares of JetBlue were last seen trading up almost 4% at $18.95 on Tuesday morning. It has a 52-week range of $15.19 to $20.14, and the Refinitiv consensus analyst target price was $19.66. The prior street-high target was $25.00.

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