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.