JetBlue airways IPO valuation

1500 Words Sep 29th, 2014 6 Pages
Case study—JetBlue airways IPO valuation

Introduction:
As a leader of airways industries, JetBlue is successful because of professional services and a good management team. In 2002, JetBlue became a public company. Despite the fact that US airline industry had witness 87 new airline failures over the previous 20 years, Jetblue overcame difficulties and expressed confidence in the bright future.

Before going public
Before going public in 2002, JetBlue has outstanding advantage in the whole industries. Because of the good performance by management team (CEO: David Neelman,President and COO: David Barger ,CFO: John Owen), JetBlue provided good services which include new aircraft, leather seat, free live TV at every seat and high
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It is proved what Jonathan Schrader said is right. Due to the large investment, the company will decrease the cash in hand for next coming years. The table 1.3 shown the NPV and discount cash flow in the next 10 years.
Discount Cash Flow 2002
2003
2004
2005
2006
2007
2008
2009
2010
NOPAT

53
89
119
149
181
195
248
270
292
NWC

-29
-31
-32
-31
-34
-36
-34
-24
-24
CapX

-290
-328
-325
-310
-326
-342
-299
-157
-133
FCFE

-266
-270
-238
-192
-179
-183
-85
89
135
DCF

-242
-232
-193
-131
-111
-103
-45
42
59
NPV
-950

From the table, it can be seen that for each year, JetBlue has an increase in both NOPAT and net working capital which means the company continue to invest in the future. So we use the next 10 years data and information to calculate the value of NPV. After that we use the WACC to calculate the share price, the table 1.4 shows the calculation of share price. per sahre value FCFE in 2010
135
WACC
10.09%
Growth rate
7.07%
Terminal value
$4,850
PV TV
$2,060
Enterprise value
$1,100
share outstanding
$41

per share
$28.58

The result of

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