Time to gamble on JetBlue (JBLU)

JetBlue Airways Corporation (NASDAQ:JBLU) hit an all-time low today and is trading just above $4 a share.  The stock is falling because they have delayed orders for 21 planes to save money.  Good for them, finally an act of goodness for shareholders.  Let's get into why throwing the dice on JBLU may be worth it.

SA's Mark Kreiger singles out JetBlue because their Q1'08 report soundly beat analyst estimates. The company has $1 billion in cash and has a book value of $6. Well above the approximately $4.50 price per share.

Remember when German Air Carrier Duetsche Lufthasnsa bought up 19% of JBLU last January?  They threw down $300 million and bought when shares were trading at $7.27 each. They are now JBLU’s single largest shareholder, with Fidelity Magellan holding the second spot with a 15% position. JP Morgan and Bear Sterns are liking JetBlue but Lehman has been lowering their target price every other week:

But here's what I like, the Potential short squeeze.

Kreiger points out there are 42 million shares sold short out of 224 million outstanding, representing a staggering 19%, The short ratio computes to a 7, meaning, it would take seven days of average daily volume just to purchase back all the shorted shares, that’s a significant number and creates the prospective of a massive short squeeze if the shorts ever get pressed into a covering mode.

Masters, airline stocks are horrible investments.  However if you have read us in the past you know we have made money from JBLU both on the short and long side.  Do the Math, JetBlue will survive and at $4 a share, it's worth a throw of the dice for a few shares.

Discliamer: No positions in JBLU.