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3 Reasons JetBlue Was A Buy And Bon-Ton Was A Goodbye!

3 Reasons JetBlue Was A Buy And Bon-Ton Was A Goodbye!
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On January 8, 2014, JetBlue (NASDAQ: JBLU) slumped to under $8.50 a share due to cancelled flights.

An article ran on Benzinga, "3 Reasons to Buy JetBlue on the Decline." After that article, JetBlue rose to around $9.45 in late January. By contrast, another article in Benzinga called for shorting Bon-Ton Stores (NASDAQ: BONT) in early December after it had risen about 50 percent to about $17.50.

Since then, Bon-Ton Stores has fallen to under $9.50 a share.

Here are the three main reasons JetBlue was a long call and Bon-Ton Stores was a short.

JetBlue was down due to the market overreacting. A previous article discussed when this happens, as it is the stock "reverting to the mean." That happens when the event is temporary, as with JetBlue. But for Bon-Ton Stores, sales and earnings were plunging. The debt load was staggering. Long story short: JetBlue's problems were short-term, while those for Bon-Ton Stores were long-term.

Related: Tap Dancing On The Grave Of Bon-Ton Stores

What makes the problems long-term for Bon-Ton Stores is the competition in the retail sector.

It has to go against Target, Wal-Mart, and Amazon. Sure the competition in the airline sector is tough. But JetBlue has lucrative landing slots on the East Coast and other parts of the country. Competitors can come on strong on price, but the landing slots are there for JetBlue to capture business.

JetBlue is positioned well for the way the economy is developing and Bon-Ton Stores is not.

More people are flying as the economy is recovering. That is bullish for JetBlue. More people are shopping online, which is why Amazon is doing such damage to the retail sector. That is bearish for Bon-Ton Stores.

The future looks to have the same contrasting trajectories for the stocks.

Posted-In: Amazon Target Wal-MartLong Ideas Short Ideas Trading Ideas Best of Benzinga


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