Airlines like JetBlue (JBLU) have produced massive losses in recent earnings cycles, as Covid-19 weighs heavily on the travel industry. But in the December-ended quarter, JetBlue surprised analysts with stronger-than-expected earnings. Should investors consider buying JetBlue stock?
Currently, the stock market is in a confirmed uptrend. The major indexes are trading near record highs as a coronavirus vaccine is now in the process of being distributed. As the current market status is bullish, it is important to identify top stock contenders for your portfolio and buy some of them. Investors should seek out leading stocks in leading industry groups that are outperforming the market.
Over the past few weeks, shares of JetBlue have shot up over 28% as the stock outperformed the rest of the market. The question is, does JetBlue stock deserve a spot in your portfolio from a fundamental point of view? Let’s look at the airline from a CAN SLIM perspective.
JetBlue Stock: Leader Or Laggard?
According to IBD Stock Checkup, JetBlue stock ranks No. 7 in terms of Composite Rating within IBD’s airline industry group. Of the 20 stocks in the group, JetBlue ranks fifth in terms of year-to-date price performance. Shares are up 44%, which indicates that the stock has had a positive 2021 thus far.
Major competitors in the industry that are ahead of JetBlue in terms of Composite Rating include Alaska Air Group (ALK) and Spirit Airlines (SAVE). But JetBlue stock still ranks ahead of other industry group peers in terms of price performance, such as United Airlines (UAL), Southwest (LUV) and Delta Air Lines (DAL).
All in all, given its position relative to its peers, it’s safe to say that JetBlue is not a leading stock at this time. The company still maintains a 53 Composite Rating.
JetBlue: Technical Analysis
JetBlue stock is currently trading near a key 20%-25% profit zone from a 16.43 consolidation buy point. The stock topped the key buy point on Feb. 8 and traded inside the buy zone for a few weeks before moving higher.
Shares of JetBlue in November regained their 200-day moving average after trading below this key level for many months since the coronavirus market crash.
The recent consolidation was second stage — a bullish sign as the stock breaks out in above the buy point. Breakouts from first- or second-stage bases are more likely to work than those from later patterns.
JetBlue stock maintains a decent Relative Strength Rating of 85, which is above the minimum of 80 for ideal growth stock contenders.
The relative strength line has also been trending higher in recent weeks, a positive sign. The RS line measures a stock’s performance against the S&P 500. Ideally, an RS line should be at or near a new high when a stock breaks out.
JetBlue Earnings, 2020 Expectations
JetBlue reported earnings on Jan. 28. Earnings beat analyst estimates while revenue also came in above Wall Street projections.
The airline posted a loss of $1.53 a share for Q4, vs. a year-ago profit of 56 cents a share on revenue of $2.03 billion. Q4 revenue plummeted 67% to $661 million.
Due to the Covid-19 pandemic, most airline stocks have suffered big losses and JetBlue is no exception. The company was especially hit by the depressed travel demand in JetBlue’s core markets such as New York and Boston. The airliner’s route network is heavily concentrated in the Northeast.
While last quarter’s revenue plunged 67%, it was a decent improvement from the prior quarter’s year over year loss of 90%. Still, demand remained quite low for the quarter overall.
JetBlue expects to lose more money in the upcoming quarter than it did in Q4 of 2020. This is mainly due to expected increases in fuel prices, as well as higher rents and landing fees.
But on the positive side, the airline is slated to receive over $500 million of federal payroll support funds this quarter, including at least $382 million of outright grants.
Although JetBlue fared worse than many other airlines amid the Covid-19 pandemic, management believes the company will recover faster than the rest of the industry. Due to the stricter quarantine rules in JetBlue’s core markets, the company expects there to be be greater pent-up demand in those areas as well.
“2020 was a year like no other, as the COVID-19 pandemic challenged our industry in ways we have never seen before,” said JetBlue CEO Robin Hayes in a recent earnings news release. “As we moved through 2020, we meaningfully reduced our cash burn, and are starting to shift our focus to rebuilding our margins. We remain cautiously optimistic that demand trends will improve later this year.”
Analysts expect a loss of $2.60 a share in 2021.
Is JBLU Stock A Buy?
While JetBlue stock could be added to your watchlist, it should not be bought right now. While the stock has risen above a proper buy point, shares remain near a profit zone which gives current investors a good place to close a position. But it is not an ideal place to initiate one. Additionally, the company’s fundamentals show it’s not a leading stock at this time.
However, JetBlue does meet the minimum requirement for an 80 Composite Rating which means it’s definitely worth keeping an eye on for the foreseeable suture. But on the flip side, the company currently struggles with a low EPS Rating of 8. These red flags show that while JetBlue has potential in a post-coronavirus world, the stock should not be added to your portfolio currently.
In the meantime, check out IBD stock lists and other IBD content to find dozens more of the best stocks to buy or watch.
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