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Pro Analysis

This airline will rally at least 20% this year on fare increases, valuation, JPMorgan says

A Jet Blue aircraft takes off from Long Beach Airport in Long Beach, CA.
Tim Rue | Bloomberg | Getty Images
A Jet Blue aircraft takes off from Long Beach Airport in Long Beach, CA.

Investors should buy JetBlue shares because the company is significantly undervalued compared with other airlines with similar fundamentals, according to JPMorgan, which upgraded the stock to overweight from neutral.

"JetBlue continues to pursue a more returns-oriented strategy with separate fare classes and first-checked-bag fees, which in turn drives healthier margins," analyst Jamie Baker wrote in a note to clients Wednesday. "We also applaud the JetBlue management team's willingness to not only participate in industry pricing increases led by other airlines but also to initiate fare increases of its own."

JetBlue has a "very favorable valuation on both an absolute and a relative basis when compared to Southwest and Spirit," he added. "We believe JetBlue shares can outperform its peers."

The airline will report fourth-quarter earnings on Thursday, according to its website.