Is It Finally Time to Buy JetBlue?

After three torturous years of selling, investors are once more buying JetBlue Airways (Nasdaq: JBLU  ) . Shares of the discount carrier rallied more than 10% on Wednesday.

Given the airline industry's history of capital destruction, you've got to wonder if today's buyers are setting themselves up to become bagholders in the next year or so. Still, the numbers speak well for JetBlue:

Metric

Estimate

Actual

Year-Ago

Revenue

$1,030 million

$1,030 million

$854 million

Per-share earnings

$0.19

$0.18

$0.04

Gross margin

Not available

36.4%

33%

Free cash flow

Not available

Not available (Boooo!)

$82 million

Sources: Yahoo! Finance and Capital IQ, a division of Standard & Poor's.

Some of these gains appear to be attributable to industrywide gains. For example, peers US Airways (NYSE: LCC  ) and Hawaiian Airlines parent Hawaiian Holdings (NYSE: HA  ) also impressed in their earnings reports this week. Hawaiian, in particular, enjoyed a rally about as large as JetBlue's.

What makes the surge really interesting is the carrier's valuation. According to Capital IQ, JetBlue ended yesterday trading for 11 times Wall Street's average 2011 profit estimate. That's too little a premium to the 9.75% annual earnings improvement that analysts expect from JetBlue over the long term. As such, I've rated the stock to outperform in my Motley Fool CAPS portfolio.

Now it's your turn to weigh in. Do you like JetBlue at current prices? Please vote in the poll below and then leave a comment to explain your thinking.

Interested in more info on JetBlue Airways? Add it to your watchlist here by clicking here.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. The Motley Fool is also on Twitter as @TheMotleyFool. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy is flying high today.


Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 22, 2010, at 10:42 PM, allmymarbles wrote:

    Using value as a basis, the best airlines to buy right now are Hawaiian, Alaska and Southwest.

  • Report this Comment On October 23, 2010, at 9:52 AM, Bonnlass wrote:

    As long as JetBlue continues to hire, expands routes and avoids the union mentality they will continue to grow. The legacy carriers tied to the spiraling mediocrity of the unions have had to park planes, cut routes and lay off employees; not to mention bankruptcies.

    JetBlue is "AFFORDABLUE" and we like it that way.

  • Report this Comment On May 28, 2011, at 11:23 AM, AeroMan4 wrote:

    You've got to be kidding - JetBlue has destroyed shareholder value for a decade. The airline might continue to grow but your investment sure as heck will not. Avoid JBLU and the rest of this industry!

    Post mortem - if you'd bought on Oct 21, 2010 at $6.62 you'd only have lost 8% ($0.54) at the $6.08 close today - not bad for an airline, most loose more than 10% / yr.

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