It’s a bit unusual for someone at the corporate level of a large-cap company to predict a stock’s low point during a crisis. That’s precisely what’s happening, however, in the case of JetBlue Airways (NASDAQ:JBLU) stock.
Calling stock-price bottoms is usually best left to qualified financial analysts (and, of course, InvestorPlace contributors). Undeterred, JetBlue President and COO Joanna Geraghty boldly predicted that JBLU stock has already bottomed out.
It is true that corporate insiders have special insight into their companies’ fiscal health. Still, it’s important to do our own due diligence before taking a stake in a company. With that in mind, we can examine the data and judge for ourselves whether JBLU stock’s low point is behind us or still in the future.
A Confident Call
The last thing we want to do is misquote the company’s president. Thus, here is Geraghty’s statement concerning the evident timing of JBLU stock’s bottoming process:
“Although the overall number of bookings remained extremely limited, we believe that we reached the bottom in terms of demand around mid-April, and expect to have a better sense of third and the fourth quarter of 2020 by early summer.”
This might constitute the most noncommittal bottom-calling statement this side of Jim Cramer. The JetBlue president left herself more than enough wiggle room to “clarify” her forecast in the future if JBLU stock collapses again.
Nevertheless, it’s pretty bold for Geraghty to claim that the worst is over when a massive travel slump is still in effect. The novel coronavirus has shattered bottom-callers’ crystal balls across all sectors, air travel included.
Perhaps Geraghty is counting on a boost from the A220-300 model narrow-body jets provided by Airbus (OTCMKTS:EADSY). Assuming there are no last-minute changes, JetBlue is set to start taking delivery of the A220-300 planes later this year.
JetBlue CEO Robin Hayes certainly seems to think that these jets could facilitate the company’s recovery. “We all look at business travel, and we know it is going to take some time to come back … An airplane like the A220 could be really helpful for that,” asserted Hayes.
The logic here, presumably, is that an aircraft on the smaller side would be more appropriate as the demand for air travel has been so drastically reduced. There may be some merit to that argument, but smaller planes ultimately can’t solve the problem of decimated flight demand.
Looking Forward to Calamity
Speaking of reduced flight demand, JetBlue’s first-quarter earnings data reflected the reality of a world in which travel is restricted and planes are grounded.
Or to be more accurate, the first-quarter earnings results reflected only some of the fiscal damage. Keep in mind that shelter-in-place orders weren’t in full effect in the United States in January and part of February.
Therefore, it’s safe to say that the second quarter’s data will be worse than those of the just-reported first quarter. Even if Geraghty’s prediction turns out to be 100% accurate, the next earnings report should be downright calamitous.
Not that the first quarter was a beacon of hope, for that matter. The analyst community projected an adjusted quarterly per-share loss of 37 cents. Meanwhile, the actual result was a loss of 42 cents per share.
First-quarter revenues of $1.59 billion might not sound terrible. But again, that’s because the full brunt of the pandemic’s damage didn’t take place during that quarter. When the next earnings season rolls around, the tension and loathing will, undoubtedly, be palpable.
The Takeaway on JBLU Stock
Calling stock-price bottoms is a hit-or-miss endeavor, even when left to the experts. With the company having to issue a dismal earnings release in several months’ time, JBLU stock’s low point is very likely somewhere in the future.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.