An Opportunity To Buy JetBlue After Last Week's Selloff Lowers Valuation Altitude

During its Q4 2016 earnings call, JetBlue Airways Corporation JBLU indicated that its Q1 2017 revenue per available seat mile would likely be lower than was earlier anticipated. The subsequent selloff in the company’s stock “presents a compelling opportunity,” Imperial Capital’s Michael Derchin said in a report.

Derchin maintains an Outperform rating on the company, while reducing the price target from $31 to $29.

Lowered Outlook

JetBlue expects its Q1 RASM to be lower than was earlier anticipated. In January, the figure is likely to record an 8 percent decline. Derchin mentioned the reasons for the shortfall as:

1. Tough comp against a 2-point benefit from winter storm Jonas in 2016.
2. Unfavorable calendar shifts around the holidays.
3. New market development beginning in an off-peak period.
4. Lower than expected leisure close-in yields.

The analyst expects February and March performance to be a significant improvement over that of January. He estimated February RASM to increase by 1 percent versus a 10.5 percent decline in February 2016 and March RASM to decline by 1 percent versus a 7 percent decline in March 2016.

The EPS estimates for FY 2017 and FY 2018 have been reduced from $2.08 to $1.85 and from $2.20 to $2.05, respectively, to reflect the lower-than-anticipated performance and higher fuel costs, Derchin mentioned.

Shares of JetBlue Closed Friday's trading down 6.87 percent at $19.65. In Monday's pre-market session, shares were seen slightly down (down 0.76 percent) at $19.50.