By JetBlue Airways Corp. experienced a significant boost in its stock value on Tuesday, thanks to a new investment made by billionaire activist investor Carl Icahn.
Shares of JetBlue (JBLU) are projected to close at its highest level since August 2, when it reached $6.90. This surge represents its largest one-day percentage increase since December 7, with a rise of over 15%.
In a filing made on Monday evening, Icahn revealed that he now holds a 9.9% stake in JetBlue. He believes that the airline’s stock is undervalued and represents a highly attractive investment opportunity.
Citi analyst Stephen Trent expressed his surprise at this unexpected investment but also suggested that it might be more long-term than originally anticipated. In his note on Tuesday, Trent observed that Icahn filed a Schedule 13D document, indicating his intent to influence the company’s direction. This is in contrast to the more commonly seen Schedule 13G filed by investors without such intentions.
Although notable investors in the airline sector have come and gone, such as Warren Buffett’s investments in major US airlines prior to the onset of COVID-19, Trent emphasized the importance of Icahn’s potential impact on JetBlue’s strategic direction at the board level.
It remains to be seen how Icahn’s involvement will shape the future of JetBlue, but this recent investment presents an intriguing development for the company.
Strategic Decisions for JetBlue amid Legal Battles
JetBlue Airlines and Spirit Airlines Inc. are currently appealing a ruling that blocked their merger, which would have potentially restricted competition within the industry. Additionally, the court’s decision to block JetBlue and American Airlines Group Inc.’s Northeastern Alliance is also under appeal.
Despite these legal battles, an analyst at Trent believes that JetBlue is facing significant long-term strategic decisions beyond the appeals. He maintains a neutral rating on the company’s stock, with a price target of $5.50. This indicates a potential downside of approximately 21% based on Tuesday’s prices.
While JetBlue shares have seen an 18% decline in the past year, the broader market has experienced gains of around 20% during the same period. However, year-to-date, JetBlue‘s shares have surged more than 25% compared to the 4% growth of the broader market represented by the S&P 500 index, and the 3% increase of the U.S. Global JETS ETF JETS.
In light of these circumstances, billionaire investor Carl Icahn has expressed his intentions to continue discussions with the management and board of directors of JetBlue regarding potential board representation, as stated in a recent filing.
Ultimately, JetBlue must navigate through these legal battles while making crucial strategic decisions that will shape its future within the airline industry.
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