JetBlue Airways (NASDAQ:JBLU) has come under significant pressure thanks to the coronavirus. But JBLU stock isn’t the only one taking a beating.
United Airlines (NASDAQ:UAL) just cut its third quarter outlook for capacity and passenger revenue. It expects for third quarter capacity to be down 70% year over year.
Alaska Air Group (NYSE:ALK) fell after noting its August load factor was 46% from 54%, and Delta (NYSE:DAL) just said only 25% of its revenues recovered, with few catalysts. The situation has gotten so bad, airline CEOs are seeking another $25 billion in aid to help them avoid job cuts.
Television personality, Kevin O’Leary took a shot at the notion recently when he said, “No more money for airlines. We don’t need it anymore. The fact is, you have to let some of them go bankrupt.”
But if you have the patience, stocks like JBLU could be well worth the wait.
Doom and Gloom Hinders JBLU Stock
Airlines have been cutting schedules on signs air travel demand remains poor.
“Demand for air travel appears to have stalled, wroth Barron’s contributor Daren Fonda. “Flights were down 48% in the week ended Sept. 6 compared with last year’s levels, in line with declines over the previous few weeks.”
However, even with all of the doom and gloom, I’d use the weakness to buy “blood in the street” opportunities like JetBlue Airways.
Granted, things could get worse for airlines. But I also believe a good deal of fear is priced in.
Helping, Morgan Stanley analyst Ravi Shanker believes airline stocks should rally an average of 30% over the next year. He has an overweight rating on JBLU.
“We like JetBlue’s significant exposure to the ‘Medium Haul’ US domestic market, which we believe is likely to be the first to return. Additionally, JBLU’s “snowbird” network provides a significant upside as leisure travel returns,” the analyst noted.
Any Vaccine News Could Help
The key to further upside for airline, or any other travel stock for that matter is a vaccine.
If we get good news on that front, stocks like JBLU could rocket higher. With that, what we do know is that Pfizer (NYSE:PFE) CEO Albert Bourla just said there’s a “good chance” the company will know if its vaccine works by the end of October 2020.
Eli Lilly (NYSE:LLY) just reported its COVID-19 treatment reduced the hospitalization rate. And Moderna (NASDAQ:MRNA) CEO Stephane Bancel said he’d know if a vaccine works by Nov. 2020.
Again, any vaccine progress from those companies could be the ticket to greater upside.
JetBlue Doubling Down on Ability to Generate Cash
Even with the pandemic, JetBlue is finding ways to stay healthy.
For example, it’s adding 24 new routes this year to generate cash and capture traffic from markets seeing stronger demand potential.
“This is the latest example of JetBlue’s ability to be nimble and play offense as we quickly adjust to new customer behaviors and booking patterns,” said Scott Laurence, head of revenue and planning, JetBlue. “This latest series of new routes – even in the current environment – advances our revised network strategy, returns more aircraft to the skies and doubles down on our ability to generate more cash sooner.”
The Bottom Line on JetBlue Stock
While airlines are still plenty of volatility and uncertainty, I’d use the weakness as an opportunity to pick up blood in the street opportunities like JBLU stock. JBLU stock won’t recover overnight.
But with potential vaccines on the way, I’d hate to miss out on upside in related stocks.
With JBLU, I’d buy it, forget about, and check back in a few months. Patience should pay off.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Cooper, an InvestorPlace.com contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.
