- Aug 20, 2002
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Penny Stocks In The News
has already showed interest in the troubled airline and has emerged as a genuine buyer. Now, LCC itself is saddled with truckload of debt but there are great synergies to be leveraged if the company can pull off a merger with American Airlines with the right kind of integration. US Airways has wafer thin margins with a net profit of $71 million in 2011 on revenues of nearly $10 billion. It is nothing great and a debt of $4.4 billion further erodes the business case for a merger but all said and done it remains a profitable company and seems to be playing all its cards right till now.
Buying LCC, thus, represents a highly risky play with potential high rewards that can be seen over the long term but AMR Corporation (PINK: AAMRQ) offers upside with more surety. Where does it leave JetBlue Airways Corporation (NASDAQ: JBLU) which was earlier tipped to be vying for American? The stock has been declining in the recent months as it becomes apparent it stands no chance to grab American Airlines.
Frankly JBLU is in a much better position among the three airlines and is poised to benefit in either scenario. If US Airways laps up American and turns it around, JetBlue stands to benefit from a stabilized market and firm ticket pricing but even if the merger goes to ashes, it won’t materially impact Jet Blue. With its profitable operations and the stock trading at a discount of 24 per cent to its book value, there’s not much downside from the current valuation. The stock trades at the forward price earnings multiple of just 7.5 and with the shakeout about to happen, it is not likely to remain at these levels for long.
has already showed interest in the troubled airline and has emerged as a genuine buyer. Now, LCC itself is saddled with truckload of debt but there are great synergies to be leveraged if the company can pull off a merger with American Airlines with the right kind of integration. US Airways has wafer thin margins with a net profit of $71 million in 2011 on revenues of nearly $10 billion. It is nothing great and a debt of $4.4 billion further erodes the business case for a merger but all said and done it remains a profitable company and seems to be playing all its cards right till now.
Buying LCC, thus, represents a highly risky play with potential high rewards that can be seen over the long term but AMR Corporation (PINK: AAMRQ) offers upside with more surety. Where does it leave JetBlue Airways Corporation (NASDAQ: JBLU) which was earlier tipped to be vying for American? The stock has been declining in the recent months as it becomes apparent it stands no chance to grab American Airlines.
Frankly JBLU is in a much better position among the three airlines and is poised to benefit in either scenario. If US Airways laps up American and turns it around, JetBlue stands to benefit from a stabilized market and firm ticket pricing but even if the merger goes to ashes, it won’t materially impact Jet Blue. With its profitable operations and the stock trading at a discount of 24 per cent to its book value, there’s not much downside from the current valuation. The stock trades at the forward price earnings multiple of just 7.5 and with the shakeout about to happen, it is not likely to remain at these levels for long.
