NEW BULLISH Plays
JetBlue Airways - JBLU - close: 21.83 change: +0.07
Stop Loss: 20.40
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on May -- at $---.--
Listed on May 11, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 7.9 million
New Positions: Yes, see below
Why We Like It:
The XAL airline index has been a disappointment this year. The XAL has been churning sideways for all of 2015 and is currently down -1.9% year to date. Meanwhile JBLU is soaring with the stock up +37.6% in 2015. These are ten-year highs.
JBLU is in the services sector. They're part of the regional airline industry. According to the company, "JetBlue is New York's Hometown Airlineâ„¢, and a leading carrier in Boston, Fort Lauderdale-Hollywood, Los Angeles (Long Beach), Orlando, and San Juan. JetBlue carries more than 32 million customers a year to 88 cities in the U.S., Caribbean, and Latin America with an average of 825 daily flights." JBLU is also the first major U.S. airline that has launched flights to Cuba since the U.S. government relaxed travel restrictions a few months ago.
The company has delivered quite a turnaround. They reported their 2015 Q1 results on April 28th. Earnings were one cent above estimates at $0.40 a share. That's a huge jump from a profit of just $0.01 a year ago. JBLU's operating margins surged from 3.1% a year ago to 16.6%. Revenues roes +12.9% to $1.52 billion in the first quarter. Not bad for a first quarter that suffered terrible winter weather on the East Coast.
JBLU said they are seeing success with their premium Mint service. Mint features lie-flat seats and is priced cheaper than rivals' business-class services. JBLU also said that their revenue for every seat flown one mile would rise 3% to 4% in April. That's a stark contrast to American Airlines, Delta, and United who all sais that revenue per seat would decline between 2% to 6% in the second quarter.
Analysts at JPMorgan have turned bullish on the airlines. They believe the U.S. airline industry has evolved. The major players have all matured and with discipline have boosted airline margins to record levels. Combine that with record-setting stock buybacks and the industry's stocks have performed well (i.e. they're up sharply in the last couple of years even though 2015 has been mediocre). The JPM team upgraded shares of JBLU to overweight and raised their price target from $19 to $28.
The rally in JBLU should have the shorts running scared. The most recent data listed short interest at 16% of the 308 million share float.
Currently JBLU is hovering just below short-term resistance near $22.00. A breakout here could spark more short covering. Tonight we are suggesting a trigger to open bullish positions at $22.15.
Trigger @ $22.15
- Suggested Positions -
Buy JBLU stock @ $22.15
- (or for more adventurous traders, try this option) -
Buy the SEP $24 CALL (JBLU150918C24) current ask $1.00
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike