Icahn’s investment in JetBlue may last longer than expected, this analyst says

Icahn disclosed a 9.9% stake in JetBlue in a filing late Monday, saying that the airline’s stock was “undervalued and represented an attractive investment opportunity.”

It was a “surprise” investment, but one that could last longer than expected, Citi analyst Stephen Trent said in a note Tuesday.

Trent noted that Icahn filed a Schedule 13D document, reflecting some intent to influence the direction of the company, rather than the more commonly seen Schedule 13G filed by investors without that intent.

“While high-profile investments in the [airline] sector come and go, such as Warren [Buffett’s] investments in some of the U.S. [major airlines] until COVID-19’s onset, the key items to watch in this case are what Mr. Icahn can or cannot do on the board level to put … JetBlue on a better strategic path,” Trent said in his note.

The filing said Icahn had, and intends to continue to have, “discussions with members of the issuer’s management and board of directors regarding the possibility of board representation.”

JetBlue and Spirit Airlines Inc.
SAVE,
-5.06%
are appealing a recent ruling that blocked their merger. Also under appeal is an earlier court decision to block JetBlue and American Airlines Group Inc.’s
AAL,
-2.14%
Northeastern Alliance, also on grounds that it would stifle competition.

“JetBlue faces important, long-term strategic decisions” aside from appealing the ruling that blocked the takeover, Trent said.

The analyst kept his rating on JetBlue’s stock at the equivalent of neutral, and with a price target of $5.50, representing a downside of about 21% over Tuesday’s prices.

JetBlue shares are down 18% in the past 12 months, compared with gains of about 20% for the S&P 500 index
SPX.

So far this year, however, the air carrier’s shares are up more than 25%, compared with an advance of around 4% for the broader index and about 3% for the U.S. Global JETS ETF
JETS.