JetBlue stock initiated with Sell rating by UBS on profitability concerns

Investing.com - UBS initiated coverage on JetBlue Airways (NASDAQ:JBLU) with a Sell rating and a $3.00 price target on Monday. According to InvestingPro data, the airline currently trades at $4.46, with analyst targets ranging from $3.00 to $8.00, reflecting the market’s uncertainty about its future prospects.

The investment firm expects JetBlue might beat second-quarter estimates but sees downside risk to third-quarter and full-year 2025 forecasts. UBS notes that JetBlue had provided conservative second-quarter guidance with implied revenue at the mid-point of -7.5% year-over-year. InvestingPro data shows the company faces significant challenges, operating with a substantial debt burden and rapidly depleting cash reserves.

UBS believes share gains from the Newark (EWR) situation likely helped JetBlue in LaGuardia (LGA), and the airline had a solid Memorial Day weekend with improved close-in strength in June. The firm models -6.0% in revenues for the second quarter versus consensus at -6.4%.

On costs, UBS estimates a 6.5% CASM-ex increase, at the high-end of JetBlue’s 6.5-8.5% outlook, citing the company’s strong operation and less weather disruption in the second quarter. This drives UBS’s second-quarter EPS estimate of -$0.31 versus consensus of -$0.34.

UBS forecasts JetBlue will remain unprofitable for the next several quarters before turning a modest profit at the EBIT level next year, which would require a meaningful acceleration in revenue metrics, leading the firm to conclude that "the risk-reward is tilted to the downside." This aligns with InvestingPro’s analysis, which highlights concerns about the company’s ability to service its debt and indicates continued profitability challenges. For deeper insights into JetBlue’s financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

In other recent news, JetBlue Airways has introduced new features aimed at enhancing customer experience with checked luggage. The airline now offers real-time bag tracking via its mobile app and supports location sharing for Apple (NASDAQ:AAPL) AirTags, allowing customers to monitor their luggage more effectively. Additionally, JetBlue has expanded its Insider Experience program to San Juan, Puerto Rico, offering travelers complimentary services and guided tours as part of its vacation packages. Meanwhile, JetBlue has appointed Stephanie Evans Greene as Senior Vice President of Marketing and Brand, bringing her extensive experience in digital-first marketing and customer strategies to the company.

JetBlue’s partnership with United Airlines has been clarified by CEO Joanna Geraghty as not being a precursor to a merger, but rather a collaboration to enhance customer benefits, such as integrated loyalty programs. Following this announcement, Morgan Stanley (NYSE:MS) maintained its Equalweight rating for JetBlue, with a price target of $8.00, suggesting that the partnership is expected to yield incremental benefits without the regulatory challenges seen in past alliances. These developments reflect JetBlue’s ongoing efforts to improve customer service and expand its market presence.

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