In the last month, investors have gotten to see JetBlue Airways (NASDAQ:JBLU) as an example of how the novel coronavirus is impacting our hopes and fears. JBLU stock moved up 50% in the span of a week. Unfortunately, it moved down nearly as fast.
The recent buying of airline stocks is rooted in investors reaching for any strand of hope for an economic recovery. Some of that is irrational. Likewise, investors are selling airline stocks based on fear. And some of that fear is likewise irrational.
The truth is somewhere in the middle. And the reality is that some airlines are in better shape than others. At the onset of the pandemic, I commented that on a historical basis, $15 seems to be a consistent high water mark for JBLU stock. And what do you know, the stock charged up to $15 in June.
But while JetBlue got ahead of itself, I think there are three compelling reasons to buy JBLU stock on its current dip. It might take some time, but JetBlue looks ready to reward investors.
JetBlue Is Playing Offense
In June, JetBlue announced a major initiative to launch 30 new routes. This would put it in direct competition with United Airlines (NYSE:UAL). And it would leave United with two options, one worse than the other.
JetBlue chose many of those new routes to make an aggressive push into the Florida market. Those plans are probably on hold a little bit as Florida is dialing back its reopening plans. A big catalyst for JetBlue and other low-cost networks like Southwest Airlines (NYSE:LUV) was the allure of Walt Disney World being open for business. That will have to wait.
But while the economy may have some fits and starts, the industry has seen an undeniable increase in traffic. And having these new routes, in addition to having a strong balance sheet will position the company in a post-pandemic world.
JetBlue Is Not Part of the Max Fleet
A good reason to consider JBLU stock over other airlines is that it does not have exposure to Boeing (NYSE:BA). Eighteen months ago, that would have seemed like a crazy statement. But Boeing will have to do all the right things to regain investors’ trust as well as the trust of airlines.
In June, Airbus announced that JetBlue was going to buy 23 new Airbus planes. The order includes 13 of the company’s new long-range, single-aisle A321XLR models.
Right now, airlines need to move forward. And any airline that has exposure to Boeing is going to see their fortunes tied to the fortunes of the remodeled Max jet.
JetBlue Doesn’t Have to Change Its Pricing Strategy
When customers do decide to come back, some of them will be working hard to repair their family budgets. This puts JetBlue in an ideal spot.
Consumers already know JetBlue as a low-cost carrier. This will allow them to attract budget-minded customers without investors worrying about the company eating away at earnings.
It May Be Time to Go Long on JBLU Stock
It’s far from a sure bet that airline traffic comes back strong in 2020. That is the inherent risk that anyone that is investing in JBLU stock, or any airline, must understand. Recently, Warren Buffett caused quite a stir by dumping a substantial amount of his airline shares. And in the short term, I would agree with Buffett that the airlines face tough math.
But I would contend that in the long term, airlines will see travelers once passengers feel safe to fly. Without the fear of asymptomatic transmission, airline travel and the rest of the economy for that matter would mostly be moving on without skipping a beat.
So, if you’re investing in JBLU stock, understand you’re playing a long game. But if you’re willing to go along for that ride, there are a lot of carriers that are a worse bet than JetBlue.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.