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Fourth-quarter results from JetBlue Airways (NASDAQ: JBLU) were actually better than Wall Street had feared, but you would never know it from the stock's reaction. Shares of JetBlue traded down 22% for the week as of 1 p.m. Thursday due to the uncertainty about the year ahead for the discount airline.
Uncertainty up ahead
JetBlue has been flying through turbulence for most of the past year. The government blocked its effort to combine with Spirit Airlines, a deal designed to drive efficiency and open up new markets for JetBlue, leaving the would-be buyer scrambling to chart a new course for growth.
The company lost $0.21 per share in the fourth quarter on revenue of $2.3 billion, topping Wall Street's consensus estimate for a loss of $0.30 per share on sales of $2.26 billion. But the airline forecast available seat miles in the current quarter would be down 2% to 5% from a year ago, and flat for all of 2025.
The sell-off, relative to the numbers provided, looks extreme. But investors appear to be skeptical about JetBlue's ability to generate sustained profitability and free cash flow on its own.
Is now the time to buy JetBlue stock?
JetBlue controls about 4% of the U.S. market, and with the Spirit deal off the table, it has no obvious way to quickly grow to better compete in an industry where the top four players control about 80%. Spirit ended up in Chapter 11 bankruptcy after the deal fell apart and is now potentially a target for Frontier Group, a deal that could make things harder on JetBlue by boosting a major competitor.
Patience will be required from investors, but the airline could help itself by providing more details and transparency surrounding its JetForward efficiency plan announced last fall.
JetBlue is in no immediate danger, and the stock appears underpriced at current levels. But until the market gets better clarity about what the airline intends to do from here, expect this stock to be stuck in a holding pattern.
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