UBS Downgrades JetBlue to Sell, Cites Downside Risk to Q3 and FY25 Estimates

UBS assumed coverage of JetBlue (JBLU) with a Sell rating and $3 price target, citing conservative Q2 target, downside risk to Q3 and FY25 estimates, and unprofitability for several quarters.

UBS has initiated coverage on JetBlue Airways (NASDAQ: JBLU) with a Sell rating and a $3.00 price target, citing significant challenges in the airline's financial outlook. The investment bank expects JetBlue to post better-than-expected second-quarter results but sees downside risk to third-quarter and full-year 2025 estimates. UBS forecasts a third-quarter EPS of -$0.48, compared to the consensus estimate of -$0.47 [1].

UBS attributes the cautious outlook to limited revenue momentum and persistent cost pressures. To achieve profitability next year, JetBlue would need a meaningful acceleration in its revenue metrics. The bank's $3.00 price target implies a valuation of roughly 9x 2026 EBITDAR [1].

The investment firm also notes that JetBlue is operating with a substantial debt burden and rapidly depleting cash reserves, which adds to its financial challenges. UBS believes that JetBlue's share gains from the Newark (EWR) situation likely helped it in LaGuardia (LGA), and the airline had a solid Memorial Day weekend with improved close-in strength in June. However, the bank models -6.0% in revenues for the second quarter versus consensus at -6.4% [2].

On costs, UBS estimates a 6.5% CASM-ex increase, at the high-end of JetBlue’s 6.5-8.5% outlook, citing the company’s strong operation and less weather disruption in the second quarter. This drives UBS’s second-quarter EPS estimate of -$0.31 versus consensus of -$0.34 [2].

UBS forecasts JetBlue will remain unprofitable for the next several quarters before turning a modest profit at the EBIT level next year, which would require a meaningful acceleration in revenue metrics. The firm concludes that "the risk-reward is tilted to the downside" [2].

In other recent news, JetBlue has introduced new features aimed at enhancing customer experience with checked luggage. The airline now offers real-time bag tracking via its mobile app and supports location sharing for Apple (NASDAQ:AAPL) AirTags. Additionally, JetBlue has expanded its Insider Experience program to San Juan, Puerto Rico, offering travelers complimentary services and guided tours as part of its vacation packages. The airline has also appointed Stephanie Evans Greene as Senior Vice President of Marketing and Brand, bringing her extensive experience in digital-first marketing and customer strategies to the company [2].

JetBlue's partnership with United Airlines has been clarified by CEO Joanna Geraghty as not being a precursor to a merger, but rather a collaboration to enhance customer benefits, such as integrated loyalty programs. Following this announcement, Morgan Stanley (NYSE:MS) maintained its Equalweight rating for JetBlue, with a price target of $8.00 [2].

References:
[1] https://www.investing.com/news/stock-market-news/ubs-previews-airline-q2-earnings-starts-jetblue-at-sell-4124542
[2] https://uk.investing.com/news/analyst-ratings/jetblue-stock-initiated-with-sell-rating-by-ubs-on-profitability-concerns-93CH-4158968