Stock Review of the Day
Stock:  JBLU (jetBlue)
Summary:  OVERPRICED

Score:  11/20
MOS: -430%
Share Price:  $12
Sticker Price:  $2

jetBlue is an airline headquartered in Long Island City, NY.  They were founded in 1998 and currently have over 22,000 employees.

jetBlue is considered a “low cost airline.”  They are the seventh largest airline in the US by passengers, have 269 planes, and 98 destinations which primarily include locations around the US and Caribbean.

Some interesting facts on jetBlue…

  • In the late 1990’s they modeled their business after Southwest Airlines offering low cost travel but sought to distinguish itself from other airlines by installing TVs in every seat.
  • They were one of the only US airlines that made a profit in 2001.
  • Their business model on low cost travel triggered disruption in the market, causing rival carriers such as Delta Air Lines and United Airlines to create competitive pricing.

I did some homework on the air line industry and business travelers account for 15% of the passengers but 75% of the profits.  In other words, business travelers typically pay for higher priced seats and accommodations.  With the impacts of COVID-19, the world has quickly realized business can be easily transacted from the comfort of your own homes with platforms such as Zoom and Microsoft Teams.  Overall, the airline industry is facing major problems.

In September of this year I took a vacation out west.  I flew from Milwaukee to Seattle, did a road trip over 10 days down to San Francisco, and then flew from San Francisco back home to Milwaukee.  I honestly never felt more comfortable while traveling.  Planes were only at 25% capacity and airports felt like a ghost town.  I literally could go to a bar and be the only customer.  It felt great from a traveler perspective but on the flip side, I felt terrible for air lines and even air plane manufacturers like Boeing and Airbus.

COVID-19 has caused major disruption within the airline industry.

Forbes published an article in July of 2020 that talks about the future of the airline industry.  537 aviation professionals were polled.  Here are those results.

How long do you believe it will take the global airline industry to return to 2019 total revenue levels? 
6 to 12 months – 7%
12 to 18 months – 19%
18 months to 3 years – 44%
3 years or more – 30%

How well prepared do you believe the airline industry was for the COVID pandemic?
Poorly prepared – 46%
Could not prepare for such a Black Swan event – 41%
Somewhat prepared – 12%
Very well prepared – 1%

Will the airline industry survive the COVID crisis?
Yes, but fundamentally changed – 69%
Yes, of course – 20%
Will not recover as we know it – 7%
Permanently damaged – 4%

The key point to pay attention to most is “Yes, but fundamentally change – 69%”.

Some big changes are coming and at this point, it’s best to sit on the sidelines with airline stocks to see who survives and more importantly, who innovates.

With a score of 11/20, the financials are not bad.  The scary part is the MOS of -430% (Share Price of $12 vs a Sticker Price of $2).

What do you think?

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All stock reviews are for entertainment purposes only. Reviews are not financial advice.

Blog Post Author
Sean Tepper