Something else to keep in mind.
JetBlue Now Takeover Candidate (JBLU, DAL, LCC) : Small Stocks Radar
According to an article in the recent Bloomberg Businessweek, JetBlue (NASDAQ: JBLU) is now a takeover candidate with Delta Airlines (NYSE: DAL) and American Airlines (PINK: AAMRQ) as the most logical suitors. US Airways (NYSE: LCC), now considering American Airlines, is always to looking to merge.
In the Bloomberg Businessweek piece by Robert Farzad and Justin Bachman, "Once High-Flying, JetBlue Returns to Earth," Delta Airlines and American Airlines are considered to be the most logical buyers due to JetBlue's strong presence at JFK. Several airline industry analysts noted in the article that this would be most appealing to Delta Airlines and American Airlines, once it emerges from bankruptcy.
At around $4.60 a share, JetBlue is certainly priced low enough to attractive a buyer looking to buy an airline at a discount. In 2007, JetBlue was trading at over $12 a share. Over the last year, JetBlue has fallen 21.33%. In recent trading, JetBlue has fallen while others such as US Airways have risen. Over the last quarter, US Airways is up more than 30%, by contrast.
As a result, it has very attractive valuations. The price-to-book ratio of JetBlue is just 0.74. The price-to-sales ratio is 0.29. On a quarterly basis, both sales growth and earnings-per-share growth are increasing for JetBlue. The forward price-to-earnings ratio for JetBlue is projected to be 7.32. There is also plenty of cash and short term investments to help defray the costs of an acquisition. JetBlue is profitable, but it pales in this area compared to other airlines.
Never appealing to a buyer, however, is a company with loads and loads of debt. With a debt-to-equity ratio of 1.78, JetBlue certainly qualifies under this standard. However, the stock is priced low, which mutates this rating. In addition, debt can always be bought back at a discount.
Lufthansa owns 19% of JetBlue and is monetizing its stake by issuing bonds backed by the shares. JetBlue is down 16.64% in the last quarter, so it is certainly priced to sell. It is also down for the last week and month of trading, too. Even if JetBlue does not sell, the mean analyst target price for the airline is $7.09 over the next year.