Today's significant drop in JetBlue's share price.
JetBlue Airways' (JBLU) shares took a dive on Tuesday, shedding a hefty 25.7%, even though the company surpassed earnings predictions. The stock's tumble reached as high as 28.9% during the day, while the broader market, specifically the S&P 500 and Nasdaq composite, saw gains of 0.9% and 2%, respectively.
The cause of JetBlue's share price plunge was a mix of underwhelming guidance and rising costs. Although the airline reported a modest loss of $0.21 per share in the final quarter of 2024, which was significantly less than the anticipated $0.29, its sales totaled $2.27 billion. This revenue figure marked a year-over-year decline, attributed to a decrease in flight capacity.
JetBlue's management, under CEO Joanna Geraghty, is committed to executing the JetForward strategy to boost profits and sales. This initiative, set to continue in 2025, includes restructuring routes and streamlining the fleet. The aim is to enhance operational efficiency, but it remains to be seen if this plan will be sufficient to counteract the challenges the company is currently facing.
Investors were left feeling let down by JetBlue's projection for 2025, which included expectations for a reduction in flights during the first quarter compared to the previous year and an under-par revenue growth target. The concerns surrounding rising costs also added to the stock's downfall.
The cost per available seat mile (ASM) is projected to escalate by 8% to 10% in the initial quarter of 2025, followed by a 5% to 7% increase for the entire fiscal year. When compared to analyst expectations, this cost outlook is less favorable, serving as a source of apprehension among shareholders.
JetBlue's decision to initiate a $750 million accelerated share repurchase plan further fueled investor uncertainty, raising red flags about the company's confidence in its future performance. The program, intended to purchase shares from the market to reduce share count and increase earnings per share, highlights investor sentiment, as JetBlue looks to shore up its financial position.
Other airline shares also took a hit, albeit with less severe losses, largely due to the overall market conditions and lingering concerns about the industry's recovery from the pandemic.
Despite JetBlue's successful Q4 performance with a lower-than-expected loss and moderate revenue, investors expressed concern over the airline's financial future due to less favorable cost projections, underwhelming guidance, and a share repurchase plan. Investors are cautious about their finance in the aviation sector, requiring solid evidence of profitability and cost efficiency before committing more money to investing in JetBlue.
