Jetblue Case Study

In: Business and Management

Submitted By danih168
Words 926
Pages 4



DATE: September, 27 2013

RE: One-Page Memo on JetBlue Case Study

The purpose of this memorandum is to discuss the JetBlue case study, and review my answers to the specified questions. I will elaborate as to which price I believe JetBlue should choose for their initial public offering (IPO), and why JetBlue should choose that price.

The first step in determining JetBlue’s IPO price is analyzing specific ratios of publicly traded competitors in JetBlue’s industry. I analyzed the Price-to-Earnings multiples, Cash Flow multiples, Total Assets multiples, and the Revenue multiples of the direct competitors of JetBlue. JetBlue’s direct competitors include; AirTran, Alaska Air, American West, MidWest, and Southwest. JetBlue’s relative stock prices are as follows:
|JetBlue's Stock Prices Implied By Different Multiples |
|Airline |P/E Multiple |CF Multiple |TA Multiple |Revenue Multiple |
|AirTran |$36.41 |$23.71 |$45.20 |$9.24 |
|Alaska Air |$47.23 |$27.64 |$30.69 |$8.92 |
|American West |$29.04 |$30.82 |$26.24 |$8.39 |
|MidWest |-$15.60 |-$11.42 |$39.30 |$3.15 |
|Southwest |$12.25 |$26.91 |$43.04 |$8.98 |

I determined that the P/E multiples and the CF multiples were the best proxies for JetBlue’s IPO price. The reason I chose the P/E and CF multiples are due to the familiarity of the P/E multiples with investors, and…...

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