Why JetBlue Stock Was Tanking This Week

JetBlue Airways (NASDAQ: JBLU) stock has taken its investors for quite a ride over the past month or so, at times soaring in reaction to news, at other points diving notably.

The last few trading sessions have leaned heavily toward the latter tendency -- the airline's shares have lost almost 13% of their value week to date as of early Friday morning, according to data compiled by S&P Global Market Intelligence. An effective thumbs-down from an influential investment bank before the week kicked off was a major reason for the drop.

A top investment bank takes flight once again

That bank is none other than Goldman Sachs, which has relaunched its coverage of U.S. airline stocks. Goldman's Catherine O'Brien is now tracking five of them; she has set buy ratings on three, and sells on the remainder. Unfortunately for JetBlue, it is one of the pair of sells (the other is Southwest Airlines) at a price target of $5.50 per share.

Although the travel and tourism sector is doing well, airlines have had to cope with certain struggles. According to reports, O'Brien wrote that carriers must come to grips with challenges such as supply chain issues and heavier maintenance requirements for their fleets. Nevertheless, the more successful companies are demonstrating improvement in off-peak flight capacity, while rising unit revenue trends are benefiting them.

As for JetBlue, the analyst believes that the airline is well positioned to take advantage of rising premium demand. However, it'll be dinged for some time by negatives such as air traffic control staff shortages in New York -- its primary hub airport is New York City's John F. Kennedy International Airport.

Cloudy skies

Investing in airlines isn't for the fainthearted, as it's a tough, high-cost industry even at the best of times. Compounding that, JetBlue's recent fundamentals haven't been impressive; it did beat the consensus analyst estimates in its most recently reported quarter, but still landed in the red on the bottom line. It also intimated that the current (fourth) quarter might be somewhat gloomy. It feels like there are healthier airline stocks to buy now.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.