JetBlue Airways: Time For a Post Nosedive Pickup

JetBlue (JBLU) has had one hell of a year. First, management was clobbered by an ice storm in the northeast. Passengers were left stranded on the tarmac for hours, flights were canceled and and that was just the beginning. The delays rippled through Jet Blue's network when pilots, planes and staff weren't where they were expected to be.

Jet Blue's reputation and its stock have taken a major hit. Interestingly, this is the first black eye for the discount airliner, usually praised for its customer service. The question is, will people avoid flying JetBlue?

I, personally, doubt it. Up to this point, JetBlue has been one of the only airlines to garner any kind of customer loyalty. They routinely put the needs and wishes of the customer first with better snacks, more leg room and personal satellite television sets. Consumer reports surveys agree, routinely ranking JetBlue atop their list of best airlines. Management process to avoid this kind of catastrophe in the future should be reasonable task.

So would I recommend JetBlue as a long term holding? Absolutely not. Save Southwest (LUV), airline stocks have created little value for investors. They are interesting cyclical businesses though and I believe we are ready for an upturn. That sounds crazy right? Oil prices are high, and JetBlue is a long haul airline. They get hit especially hard when prices increase. So why is now a time to buy?

It is important to invest in cyclical industries when there is blood of the streets. When times are obviously bad, and few people are obviously paying attention, it is time to invest. When cyclical stocks fall out of favor, scoop them up. It's time to scoop up JetBlue.

Disclosure: Author has a position in JBLU

JBLU 1-yr chart

Comments

[aesenior:]

Historically (2 out of 5 yrs) the stock goes down from now to the 2Q earnings report. The Earnings trend is still down. I would'nt bet on it.

2007 Jul 05 12:51 PM

[chrisfinlayson:]

A stock can either be up, down or unchanged over a period of time. You argue that 2 out of four years the stock has been down for the 2Q report. That's 40% of the time. The random chance the stock will be down is 33%. I'm not sure your analysis passes as statistically relevant.

You have to buy cyclical stocks when earnings are down. By the time earnings recover, the opportunity will have passed.

2007 Jul 05 05:09 PM