JetBlue Forecasts Revenue to Plunge 70% in Q4 as Fresh Spike in COVID-19 Cases Hurts

JetBlue Airways, a major American low-cost airline, forecasts revenue to plunge 70% y/y in the fourth quarter, worse compared to a previous prediction of nearly 65% y/y decline, and expects cash burn to surge to around $8 million per day as a resurgence in COVID-19 cases hammered air travel demand.

The passenger carrier said given the recent booking trends and the delay in receipt of cash tax refunds of nearly $70 million originally anticipated during the fourth quarter, the company now expects its average daily cash burn in the fourth quarter to be in a range of $6 million and $8 million, compared to its prior expectation of a range between $4 million and $6 million.

Booking trends remain volatile and the company continues to believe demand and revenue recovery will be non-linear through the fourth quarter and beyond, JetBlue added.

JetBlue Airways’ shares were down about 16% so far this year, traded nearly flat in pre-market trading on Monday.

JetBlue Airways Stock Price Forecast

Ten equity analysts forecast the average price in 12 months at $13.50 with a high forecast of $17.00 and a low forecast of $12.00. The average price target represents a -14.29% decrease from the last price of $15.75. From those ten analysts, three rated “Buy”, six rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $16 with a high of $29 under a bull-case scenario and $6 under the worst-case scenario. The firm currently has an “Overweight” rating on the ratings company’s stock.

Several other analysts have also upgraded their stock outlook. Stifel raised their price target to $13 from $12. Cowen and Company upped their target price to $13 from $10. Credit Suisse increased the target price to $12 from $11. JP Morgan lowered the target price to $16 from $17. UBS raised the target price to $13 from $9.

Analyst Comments

“We like JetBlue’s significant exposure to the “Medium Haul” U.S. domestic market, which we believe is likely to be the first to return (with short-haul challenged by driving and long-haul more challenged by international regulations). Additionally, JBLU’s “snowbird” network provides significant upside as leisure travel returns,” said Ravi Shanker, equity analyst at Morgan Stanley.

“We use a 10-year DCF assuming a 6.8% WACC and terminal cash flow perpetual growth rate of 2%. Our DCF valuation implies a 2023 EV/EBITDAR multiple of 6.1x, which is in line with LUV’s historical average given the “best in class” operating model,” Shanker added.

Upside and Downside Risks

Risks to Upside: 1) COVID-19 vaccine timing. 2) Leisure market recovery for point to point network. 3) Industry rationalization and fare stability – highlighted by Morgan Stanley.

Risks to Downside: 1) COVID-19 the second wave. 2) Better improvement in international travel vs. domestic.

JetBlue Airways’ Q3 Revenue Slumps 76% as COVID-19 Pandemic Slams Air Travel Demand

JetBlue Airways, a major American low-cost airline, reported that its revenue slumped 76% year-over-year as the COVID-19 pandemic affected air travel demand but the seventh-largest airline in the United States by passengers carried expects the booking to increase over the coming December holidays.

The passenger carrier company reported a net loss of $393 million or $1.44 in the third quarter of 2020, worst compared to a $187 million profit same period a year ago. Adjusted loss per share was $1.75 in the third quarter of 2020 versus adjusted diluted earnings per share of $0.59 in the third quarter of 2019.

“JetBlue reported 3Q20 adjusted loss slightly better than our and the consensus estimate. The company is seeing modestly improving revenue and demand trends in 4Q20 driven by momentum in leisure and VFR demand,” said Helane Becker, equity analyst at Cowen and Company, who gave a price target of $10.

“JetBlue and Airbus agreed to reshape the order book for deliveries previously expected in 2021 / 2022, which will limit cash out the door until CF b/e can be achieved.”

The company forecasts its revenue to decline 65% in the last quarter of this year and said they have negotiated an agreement with Airbus to defer additional aircraft and associated capital expenditure over the next few years.

JetBlue Airways’ share price was down 6.5% on Monday. The company traded as low as $12.40 and last traded at $12.56.

Executives’ Comments

“Our efforts to raise liquidity, reshape our network, and reduce costs, are bearing fruit, and have helped us navigate the immediate crisis. We are confident that our low-cost, low fare leisure model, with the best crew members in the industry, and a brand that customers trust, will all help JetBlue emerge stronger from this crisis,” said Robin Hayes, JetBlue’s Chief Executive Officer.

“In the near term, we continue to manage our daily flying and take tactical actions to ensure we generate cash as demand recovers. We are also executing revenue and cost initiatives, redeploying our aircraft to new, cash accretive markets, and setting JetBlue up for a strong rebound. Naturally, we aim to be free cash flow positive, with the goal of repairing our balance sheet over the coming years.”

“Our average daily cash burn for the third quarter was $6.1 million dollars, ahead of the $7 to $9 million dollar range we anticipated 3 months ago. This was the result of a modest improvement in demand, beginning in August, variable cost savings achieved through a balanced approach to capacity, and the many actions we took to minimize fixed costs across our business. For the fourth quarter, we estimate our daily cash burn to be between $4 and $6 million dollars,” said Steve Priest, JetBlue’s Chief Financial Officer.

JetBlue Airways Stock Price Forecast

Eight equity analysts forecast the average price in 12 months at $13.33 with a high forecast of $17.00 and a low forecast of $10.00. The average price target represents a 6.13% increase from the last price of $12.56. From those eight analysts, three rated “Buy”, five rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $17 with a high of $30 under a bull-case scenario and $8 under the worst-case scenario. The firm currently has an “overweight” rating on the Airline’s stock. ValuEngine raised shares of JetBlue Airways to a “strong-buy” rating from a “buy”.

Several other analysts have also recently commented on the stock. Zacks Investment Research raised shares to a “hold” rating from a “sell” and set a $13 target price. Goldman Sachs Group upped their target price to $17 from $12 and gave the stock a “buy” rating. At last, JP Morgan raised their stock price forecast to an “overweight” from an “underweight” rating and raised their target price to $17 from $12.

Analyst Comments

“We like JetBlue’s significant exposure to the “Medium Haul” U.S. domestic market, which we believe is likely to be the first to return (with short-haul challenged by driving and long-haul more challenged by international regulations). Additionally, JBLU’s “snowbird” network provides significant upside as leisure travel returns,” said Ravi Shanker, equity analysts at Morgan Stanley.

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