JBLU Stock Could Take Off After Earnings

Lillian Currens

JetBlue Airways Corporation (NASDAQ:JBLU) just announced a partnership with Norwegian Air to expand its transatlantic network, potentially increasing traffic and average fares. Shares of the flight concern are inching higher today in response, extending their rebound off the early October low of $15.87. What's more, the recent bounce could have legs, with JBLU stock flashing a historic buy signal just ahead of the company's third-quarter earnings -- due next Tuesday, Oct. 22.

Since the aforementioned bottom, JBLU has managed a roughly 7% gain. Plus, the equity just pulled back to its 80-month moving average, after a lengthy stretch north of the trendline -- a technical signal that's had bullish implications for the equity in the past. In fact, according to data from Schaeffer's Senior Quantitative Analyst Rocky White, JetBlue has seen three prior signals of this type in the past 15 years. Three months after these signals, the stock was higher each time, averaging a 12% gain. From its current perch at $17.04, a similar move would put JBLU just atop its $19 region.

JBLU stock chart 1017
JBLU stock chart 1017

JetBlue stock tends to do well after earnings, too, with five of its last eight post-earnings moves being positive -- including the last four. This time around, the options pits are pricing in a next-day swing of 4.7%, which falls just slightly above the security's average one-day post-earnings move of 4.2% over the past two years.

Digging deeper, the options pits have been extremely call-centric these past couple of weeks, with JBLU sporting a 10-day call/put volume ratio of 11.38 on the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio falls higher than 74% of all other reading from the past year, indicating a bigger appetite for these bullish bets than usual.

Analysts haven't been so sure of JBLU, though. The majority of the 14 analysts in coverage say the airline name is a "hold" or worse, which could spark some tailwinds, should members of the brokerage bunch begin to change their tune on an earnings beat. On the other hand, JBLU's consensus 12-month target price of $20.63 is at a solid 21% premium to its current perch.

For those wanting to speculate on JBLU with options, now might be the time, considering JBLU's Schaeffer Volatility Index (SVI) of 30% falls in the relatively low 38th percentile of its annual range. This implies that near-term options are still pricing in relatively modest volatility expectations.