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JetBlue Is The Best Airline Stock To Buy During The Coronavirus Panic


  • The growing COVID-19 outbreak started to have a dramatic impact on domestic travel demand over the past week.
  • Southwest Airlines recently became the latest airline to slash its revenue guidance because of a slump in bookings.
  • Yet investors have punished airline stocks too harshly, particularly those with strong balance sheets like Southwest and JetBlue.
  • JetBlue Airways stock is a strong buy for long-term investors at its Thursday closing price of $13.86.

In just over a week, the COVID-19 coronavirus outbreak has gone from mainly an overseas phenomenon to one that is rippling across the U.S. As of 3 p.m. EST on Thursday, there had been more than 200 confirmed cases in the country, including people evacuated from China and from the Diamond Princess cruise ship. Most of these cases have been reported since the beginning of March, including virtually all of the cases involving patients being infected in the U.S.

Not surprisingly, this has led to a sharp downturn in air travel demand, as businesses try to protect their employees and leisure travelers choose to stay home. Whereas airlines with high international exposure like United Airlines (UAL) were facing the brunt of the impact in February, domestic-focused airlines are now in the line of fire, too.

Nevertheless, investors have overreacted to the COVID-19 outbreak by dumping airline stocks wholesale. This has created some great buying opportunities for long-term investors. I continue to think that JetBlue Airways (NASDAQ:JBLU) stock is the best of the bunch. With JetBlue stock having lost about a third of its value since mid-February, this is a great time to invest in this growth company.

Airlines start to cut forecasts

In late February, United Airlines suspended its full-year forecast due to the unknown impact of coronavirus, while telling investors that it was still on track to meet its Q1 EPS guidance of $0.75-$1.25. The carrier disclosed a sharp decline in demand on routes to Asia (especially China). However, it said that increased revenue from a new credit card agreement and lower fuel prices would offset this headwind.

Over the past several days, though, the coronavirus-related demand shock has expanded to other international regions and the domestic market. On Wednesday, United and JetBlue told employees that they would implement

This article was written by

Adam Levine-Weinberg is a value investor who has been researching and writing about stocks for Seeking Alpha and The Motley Fool since 2011. He graduated from Swarthmore College in 2007, received an M.A. in Political Science from the University of Chicago in 2009, and received his CFA charter in 2017. He is always on the hunt for irrationally beaten-down stocks, particularly in the aerospace, retail, real estate, and auto sectors.

Analyst’s Disclosure: I am/we are long JBLU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I am also long Jan. 2021 $40 calls on LUV and Jan. 2022 $10 calls on JBLU.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (126)

gekko13 profile picture
So American tapped into some credit lines. More buy-backs to come I reckon, since that cash isn't considered "bailout money" and therefore not subject to restrictions or conditions. Think about it...when is the smart time to buy back shares, when the price is in the toilet or when the price is in the stratosphere? At these prices, they get more bang for their buck.

When the share price recovers next year, they can then unload those shares and make a hefty profit. I mean, that WOULD be the smart play if you're a CEO. What's IDIOTIC is buying back shares when the stock price is high, like a lot of these carriers have done.

That being said, i was watching the live charts on JBLU today, and it looks like it is being accumulated at these price levels.
Adam Levine-Weinberg CFA profile picture
No, American Airlines tapped its credit lines to ensure that it has a boatload of cash to cover what it is likely to burn over the next 6 months. It will most definitely not be buying back shares.
gekko13 profile picture
Do you really believe that? You don't think if given an opportunity they would jump on it? They will use the bailout money for their obligations. Why tap into new debt when a bailout is coming? C'mon, you underestimate the greed and corruption in Corporate America. The game is rigged and if you don't know that by now, then there is no helping you.
Adam Levine-Weinberg CFA profile picture
In any case, the bailout terms require that all dividends and buybacks be halted. I guess in theory AAL could buy back stock and then stop as soon as it got bailout money, but there is a 0.01% chance that this is what's happening. Cash is king right now, and all these airline execs are thinking about right now is keeping the ship afloat for as long as possible.
y2kesq profile picture
Great call!
Would you look at the options at this point? The Jan 2022 options is something that looks like a good speculative position at this point, if it returns to 15 you could double money, 20 close to quadruple.
Adam Levine-Weinberg CFA profile picture
Yeah, I already bought some $10 calls for Jan. 2022 and might make another buy in the next few weeks.
Bad day for JB yesterday, down 15%.

Delta? Down 21%! Ouch!
Tim Dunn profile picture
do you not know when it is time to just walk away from a conversation and not make a fool of yourself?

JBLU is the ONLY US airline that is not up at this hour today.

Delta is leading the US airline higher at levels far above the Dow.
Nice mid-day data point, how did YESTERDAY go?
Tim Dunn profile picture
seriously, go get a life instead of sending in front of a computer trying to prove someone wrong.

DAL has added more market cap this morning than any other airline.

JBLU just turned positive.

If you can't be fair and balanced and are driven by emotion and bias, it becomes obvious pretty quick.
Tim Dunn profile picture
can we stop this childish game of trying to guess who will fare better in this corona virus environment?

With circuit breakers pulled, JBLU is leading the industry down.
Care to revise your statement about who is down more, JB or Delta?
Tim Dunn profile picture
no, I don't.

As long as you sit at your computer waiting for the single datapoint or factoid to try to win your argument, you won't get it.

and no, I did not say that JBLU is on the verge of bankruptcy. The fact that you can't correctly read what I wrote is a huge part of the problem.

Given that JBLU is down at least as much as the big 3 that fly the Atlantic, this is not about routes or networks but about a disease in an unpredictable market.

Get back with me after the "all clear" is sounded - or humanity is wiped off the map and let me know how it worked out for you.

Feel free to carry on. JBLU has no advantage. The market is proving that.
So disingenuous.

Earlier in this thread you tried, time after time, to suggest that something is fundamentally wrong with JetBlue because the market sold JBLU quicker than others.

Now That the Warren Buffet effect has worn off for Delta it’s simply about a virus and unpredictable market.

Get out of here.

Not a good time to be the largest Transatlantic airline in the US...
Tim Dunn profile picture
game on, @bluedriver .

Are you willing to put your job on the line as to which airline will file for bankruptcy first?

btw, in terms of % of revenue, United, not Delta is the largest airline to Europe.

Delta is not the largest as a percentage of revenue because it has large and growing operations at JFK and BOS. Delta is not going to walk away from markets competitive w/ JBLU because of this.

Just wait til your furlough notice .
Now you think JB will file for bankruptcy? Good one.
Tim Dunn profile picture
precisely nowhere did I say that JBLU will file for bankruptcy.

Quote me if you believe otherwise.
I certainly do NOT take it personal. Most of the time I don't even feel sufficiently motivated to counter your posts.

But you calling others biased... now THAT is something, really something.
Delta Tim... what is that famous stock quote about "past stock performance" being no guarantee of future performance? I can't remember how that goes???

While you chew on that, I just want to say how good it is that Delta is in top of the industry, because as history shows, when an airline reaches the top of the aviation industry, they always stay at the top... Right???
Tim Dunn profile picture
Yes, past performance is not a guarantee of future performance.

Too bad that you don't understand the corollary concept that when stock performance DOES NOT indicate that an airline is going to be at the top of the industry, it is unlikely that it will be in reality.

JBLU stock has not been best in industry for years. I have no idea why you or others can't seem to understand that concept and take it deeply personal when someone points that out to you.
March down to only 65-70% is not great, at all. And will be lower than that on Transatlantic, especially flights that aren't the most premium city pairs... Such as those added to a new small hub, one which Delta carries ~25% of the local traffic...

And I don't wish for Delta to fail. And business traffic is DEFINITELY down considerably, as is leisure.
Tim Dunn profile picture
can you actually read? 65-70% is Delta's SYSTEM load factor (projected for March).

And did you bother to actually read the presentations and transcripts that multiple airlines including DAL and JBLU made today?

There is no evidence that ANY US airline is in dire condition.

My argument is and will continue to be that JBLU is NOT the best airline to ride out the virus crisis and there isn't a soul that has provided any evidence to support their position that it is.

And there hasn't been a single thing said by any of the execs of any of these airlines that indicates anything quantitatively different in the impact.

There simply is not any evidence that JBLU is any different than it was before this all started. It had lower margins than other airlines, shrinking market share in its top markets, and financial metrics that simply have not translated into a competitive advantage.
Hey Tim,

Wanna make a bet. I bet Delta’s 15% reduction in Domestic capacity comes primarily from Boston, Seattle and Miami where it was pushing its way in by losing money domestically. Retreat to Atlanta, Detroit and Minneapolis.
Tim Dunn profile picture
I absolutely will bet you that you are wrong.
PM me with how much you are putting on the table.

You might start by providing actual data, not your bias, that shows that Delta is losing money in Boston, Seattle and Miami.
You won't because you can't.
Delta NEEDS higher revenue, much higher, because of its higher costs.

Yes, next summer things will be equal, but until next summer a lot of money to be lost Transatlantic on everything but the most premium high demand routes, if not those as well. Secondary, anti-comptetive added markets simply to harrass a future LCC competitor pre-launch will lose the most money through the pandemic.

MSP-LHR a few nights ago had about 70 people on an A330. And that's a long established Delta flight from a much bigger Delta hub with a lot less Transatlantic competition...
Tim Dunn profile picture
Delta is a master of getting costs out... always has been.

And you still presume that there is no business travel. That is patently false.

No one said that air travel isn't being impacted and there are lighter than normal flights.

instead of your anecdotal tidbits, let's go with what Delta execs SAID which is that their SYSTEM load factor for March is expected to be 65-70%.

Now, tell me what JBLU's SYSTEM load factor is running and then we can make an apples to apples comparison.

btw, as much as you want to hope that Delta fails, I have not predicted any failures among US airlines as a result of the virus crisis. Everyone's growth plans will be challenged but there is no evidence yet that any airline is walking away from their strategic plans or their ability to maintain a coherent network even at reduced capacity.
JBLU up almost twice DAL today.

I agree Delta Tim Dunn, the market is usually correct.

Good timing for Delta to have thrown all those additional Transatlantic flights into Boston, to preempt JetBlue, just in time for Coronavirus.

JetBlue entry next year should be timed well for the worst of Coronavirus to have blown over.
Tim Dunn profile picture

Delta started building up Boston for the longhaul and it will do what it needs to do to accomplish its strategic goals there. Given that they reached local market revenue parity with JBLU in Boston last summer, even before the Chicago, Newark, and DC adds, Delta is very likely the largest airline in Boston based on revenue. If JBLU wants to fly more aircraft around, only Greta will be upset.

If next summer works good for JBLU's expansion to Europe, it will work just as well for expansion for anyone else. Shouldn't be hard for anyone that chooses to look at the subject objectively to see that.
brian65pls profile picture
Choose to sell (@ nice profits bought many years ago) sold because of to much unknown information after the press release this morning. Glad I no longer will worry about JBLU. I think the management is great which why I held for as long as I did since it started dropping last month. Will likely buy back (higher/lower) when the CV19 air travel disruptions end.
Trade In Mexico profile picture
Spirit looks very cheap also....
Interesting article, thanks for your work here. Jet Blue is our favorite airline over many years. Especially enjoyed their lead offering of leather seats and back of seat TV. All that aside,now is not the time for such an investment. Simply, too much uncertainty.
Adam Levine-Weinberg CFA profile picture
I think the current climate of "uncertainty" makes this a great time to buy. In my opinion, there isn't actually a lot of uncertainty about what really matters:

1) Will the current sharp decline in air travel demand continue for many years? (Answer: no)
2) Does JetBlue have a strong enough balance sheet to survive until air traffic rebounds? (Answer: yes)
Lares Capital profile picture
One major fact which you missed: Jetblue does not hedge its fuel price. The oil price collapse will have a dramatic (positive) effect on its margins unlike on other airlines who hedge.
Tim Dunn profile picture
neither does any other US airline hedge fuel except for LUV
Adam Levine-Weinberg CFA profile picture
@Lares Capital I did mention that oil prices have declined significantly. JetBlue is about average in terms of hedging right now. As of January it had collars for about 20% of its expected consumption in the first half of 2020, so it is capturing roughly 80% of the reduction in fuel prices. Assuming it hasn't put any additional hedges on, it would get more of a benefit in the second half of the year assuming prices remain at recent levels.

How that impacts margins depends on the trajectory of demand. Double-digit RASM declines for at least part of the year can't be ruled out.
Tim Dunn profile picture
It is far more likely that JBLU's fuel collars are to protect itself from high increases in fuel than from decreases; collars rarely provide equal protection in both directions. Unhedged carriers will capture 100% of the downside.
JBLU has not beaten unhedged carriers at any time over the past five years - and fuel has gyrated up and down. It is unlikely that JBLU will gain a benefit now.

And you are correct that the biggest impact is revenue related - and the market has consistently shown that discount carriers and those with low market share in their top market are hit the hardest in a downturn.
Healthy Wealth Coach profile picture
I agree with you 100% Adam.

In spite of the volatility, In a few years, I think we will look back at the timing of this article and see that you nailed it. Great article.
Adam Levine-Weinberg CFA profile picture
Thanks. We will see!
Agree, in at 14.61 but probably not the best entry point. I wonder what the Coronavirus is doing to their planned Transatlantic rollout via 321ULR/neo.
Adam Levine-Weinberg CFA profile picture
I doubt there is any impact. We're still more than 12 months out from when the first transatlantic flights would be starting.
Do you have an opinion on American? I took a decent position in them pre-Corona, as they were quite cheap in comparison to peers, but I'm wondering if it might be more prudent to shift my position to airlines with more-solid balance sheets.
Adam Levine-Weinberg CFA profile picture
American has plenty of upside if it can pull off its strategic plans but also the most downside of the airlines because it has the weakest balance sheet and weakest profit margin. I own a little AAL but far more JBLU, which I think has even more upside with less risk.
gekko13 profile picture
AAL has a lot of free cash in their kitty though...
Michael Loftis profile picture
WUT? AAL has a terrible balance sheet.
Tim Dunn profile picture
@Adam Levine-Weinberg CFA
The problem is that your theory doesn't match what is actually happening in the market.
As of this hour, JBLU is off 37% from its one month highs which is more than other carriers, but less than some. Just about every day of the past week plus of airline industry selloffs, JBLU has sold off more than other airlines. The same is true today.
Investors are not accepting your theories as to why some airlines should do better.

DAL and LUV have had the best performance of the US airline industry over the past two weeks which have been nothing less than a bloodletting for the airline industry.

Yes, the selloff is overdone but the market sees real reasons for why it is doing what it is doing. We could debate those reasons but it doesn't change that until the market indicates a change in its choices of what carriers are most and least impacted, it does little to argue something that isn't supported by market performance.
Adam Levine-Weinberg CFA profile picture
The market is wrong.

For anyone with a three-year investment horizon (let alone longer), the coronavirus is likely to be pretty immaterial to JetBlue's long-term stock price. So the fact that JetBlue has sold off so hard makes it more attractive, not less.
Tim Dunn profile picture
I supposed you can assume the role of telling the market that it is wrong but ultimately when analyst/journalist comments don't align with what the market is doing, then you have to ask who is wrong.

JBLU announced it is pulling down capacity - which is bad for an airline that is driven by high growth rates.

And JBLU's network is THE MOST highly competitive in the industry; they have THE MOST COMPETITION in their top markets. That does NOT bode well for holding onto market position in a downturn. Not my opinion but easily confirmed by historic industry facts.

JBLU is also a leisure airline and, despite what some are arguing, there are business passengers traveling and there are leisure passengers that are canceling their trips.

Finally, JBLU has built its model around feeding connections to a whole bunch of international airlines - just as ALK has done. The international part of the downturn most definitely is impacting JBLU and ALK.

and again, actual market performance, not my opinion or yours, shows that DAL and LUV are doing better in the market onslaught than UAL, JBLU, ALK, AAL, SAVE or anyone else.

Whether you, me or anyone likes that is immaterial. Ultimately the market does decide what it believes is best and if repeated arguments for why a particular stock should do better don't match what the market is doing, then there needs to be an admission that maybe the real reasons aren't being addressed and a rework of one's commentary.
So Mr-Market-is-always-right, 2hy should the author even bother writing an articel if the market already is prefect?
Veeon profile picture
Put a basket under this apple and wait for it to drop in at the bargain price you specify knowing it could go even lower.
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