Is It Time to Bet on a Turnaround for This Beaten-Down Airline Stock?

JetBlue Airways Corporation (JBLU) is a discount passenger air transportation company that offers its services to various destinations. The company operates through a fleet of Airbus (EADSY) and Embraer (ERJ) aircraft. Additionally, it also provides non-air travel products and services such as travel insurance, cruises, and car rental services. Its subsidiary, JetBlue Technology Ventures, collaborates and invests in startups in the transportation, travel, and hospitality sectors.

Serving more than 100 destinations across the U.S., Latin America, Europe, Canada, and the Caribbean, the company operates from its headquarters in Long Island City, New York.

Valued at $1.92 billion, JBLU stock has underperformed in 2024. The small-cap airline stock is up just 2.7% on a year to date basis, and trades down about 25% from its 52-week high of $7.58, set in April. Longer-term, JBLU is down by 46% over the past 10 years. 

However, the stock recently caught some tailwinds, and has gained upwards of 18% in the last month alone.

JetBlue Surprises in Q2

JetBlue Airways posted its Q2 earnings results in late July, and surprised to the upside with an unexpected profit of $25 million, or $0.08 per share, on an adjusted basis. Analysts were anticipating a loss of $0.13 per share. During the quarter, the company generated total revenue of $2.43 billion, slightly exceeding Wall Street’s $2.4 billion consensus.

“We also delivered strong progress from our cost savings programs in the second quarter, while fuel prices continued to moderate and as a result, we were able to keep costs low in order to generate a positive pre-tax profit for the quarter,” said CEO Joanna Geraghty on the earnings call.

The carrier is still focused on cost discipline, and plans to defer delivery of some Airbus aircraft in a move that will reduce capital expenditures by $3 billion. JetBlue is targeting $800-900 million of incremental EBIT via cost savings through 2027. 

Based on JBLU's guidance for dwindling revenues, it's easy to see why the company is so laser-focused on cost cuts to support the bottom line. For Q3, the carrier guided for revenue to be down by 1.5% to 5.5%, with available seat miles projected to decline by 3% to 6%. For the full fiscal year, revenue is expected to drop between 4% and 6%, with available seat miles down 2.5% to 5%.

What's the Analyst Forecast for JBLU Stock?

Wall Street analysts aren’t very impressed by airline stock, which has a consensus “Hold” rating. Out of 12 analysts tracking JBLU, 2 have a “Strong Buy” rating, 7 analysts have a “Hold” rating, and 3 analysts are sticking with a “Strong Sell” rating.

Earlier this week, BofA Securities (BAC) analyst Andrew G. Didora upgraded JetBlue from “Underperform” to “Neutral,” and raised the stock's price target from $3 to $6. 

While acknowledging challenges in JetBlue’s balance sheet, Didora highlighted a favorable industry backdrop with positive travel trends, as well as JetBlue's specific measures to address its own cost structure. He forecasts a nearly $3.7 billion liquidity position by 2026, which gives the company time to execute its turnaround plan. 

The analyst also raised his EPS estimates for the third quarter, fiscal 2024, and fiscal 2025, reflecting better-than-expected revenue performance and the impact of the JetForward plan - but Didora remains cautious overall.

"Returning to sustainable profitability is a key goal for JBLU, but execution risks related to the JetForward plan are a further challenge should EBIT-enhancing initiatives take longer than expected," he warned in a note accompanying the upgrade.

JBLU currently has a mean price target of $6.32 from analysts, indicating expected upside of 10.3% from current prices.