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JetBlue shares gain 73% in 2014

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Share price performance

JetBlue Airways Corporation’s (JBLU) share price has increased by ~73% since the beginning of the year, from $8.60 to $14.90, as of December 2, 2014. The share prices of most US airline companies have increased during the period. This is a result of strong earnings supported by positive macroeconomic factors and strong demand for air travel.

On October 23, 2014, JetBlue’s share price fell ~3% to finish the day at $10.86. That was the same day JetBlue released its third-quarter results, which were lower than analyst estimates.

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Lower fuel costs to the rescue

Meanwhile, JetBlue’s share price, and the stocks of all other airlines for that matter, increased in November on the continued decline of crude oil prices. The SPDR S&P Transportation ETF (XTN) also benefited from the increased price of airline stocks.

JetBlue hasn’t declared a dividend, but in May 2014, the company did enter into an accelerated share repurchase program (or ASR). JetBlue paid $60 million to JP Morgan to repurchase 5.1 million shares. During 3Q14, 423,000 shares were repurchased. JetBlue repurchased a total of 5.5 million shares under the ASR at an average price of $10.90. 

Enterprise value multiples

JetBlue’s enterprise value (or EV) divided by forward EBITDA (earnings before interest, taxes, depreciation, and amortization) is 5.26x. Here’s how that EV/EBITDA compares to its peers:

  • Southwest Airlines Co. (LUV) – 6.62x
  • Delta Air Lines, Inc. (DAL) – 5.54x
  • American Airlines Group Inc. (AAL) – 5.35x
  • Alaska Air Group, Inc. (ALK) – 5.14x 
  • United Continental Holdings Inc.(UAL) – 5.11x

Valuation multiples such as the EV/EBITDA help investors compare the prices of different companies in an industry against specific variables that drive the market value of the stock.

Out of 19 Wall Street analysts tracking JetBlue stock, eight recommend “buy,” eight recommend “hold,” and two recommend “sell.” The target price is $15.42, an upside of 3.5% over the current share price of $14.90.

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