JetBlue (JBLU) had a very good 2015, until December.
Up more than 46% for the year, it reported weaker guidance for Q4 and investors ran, dropping the stock 22% in the past month.
This is where you should take a second look at JBLU stock to determine whether the selloff was an indicator of more bad things to come, or whether the market overreacted and now presents a great entry point on an oversold stock.
We’re going with the latter view. JBLU is still on a growth path with more good opportunities for 2016 than challenges.
JetBlue Looking to Head West
One concern that has surfaced recently is that JBLU seems to be having trouble building a franchise on the West Coast that’s as powerful as the one it has on the East Coast. Its hub out west is Long Beach Airport (LGB), which doesn’t even have a customs section.
Most of the competition flies out of LAX (Los Angeles International), which means when prospective fliers are searching for airports, Long Beach doesn’t even show up.
To counter this challenge, as well as to build its brand, JBLU has taken to wildly discounting its fares, so much that the company is now losing money on a lot of key flights into and out of LGB.
If it wasn’t for JBLU’s savvy management, this would be a concern. But, while it looks for an ideal hub airport, it’s entirely possible that JBLU is flying routes at a loss to gain passengers and build brand identity.
This scenario is similar to Southwest (LUV) in the early days, when it was shut out of most major airports and had to operate from secondary and tertiary airports. That strategy worked so well that it helped dismantle the old hub-centric strategy of the major airlines.
JBLU may be willing to lose some revenue in the short term to gain greater market penetration. Management can discount fares so people are willing to fly out of or into LGB instead of LAX, and see if it’s viable.
JetBlue Already Dominates the East Coast
In the meantime, JBLU continues to dominate the East Coast. A new route from New York to Havana, Cuba will be very popular. It also has added two new routes among Orlando-Fort Lauderdale-Albany, which is a major snowbird draw.
Thanks to extremely inexpensive fuel, JBLU is saving a lot of money when it comes time to refuel its planes. JBLU has a fairly young fleet as well, which means its jets are more fuel-efficient than many of the larger airlines’ older fleets.
Despite a messy start to the new year, JBLU is in a very good position to make the most out of 2016. Therefore, analysts’ fears that management is taking too great a risk in the West can actually be to your advantage when considering JBLU stock.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
